Home » Posts tagged 'rba'

Tag Archives: rba

Australia Shocks With Bigger Than Expected Rate Hike, As Lowe Admits Embarrassment At Being So Wrong

May 3, 2022

Australia Shocks With Bigger Than Expected Rate Hike, As Lowe Admits Embarrassment At Being So Wrong

In our preview of what was expected to be Australia’s first rate hike since 2010, we said that consensus expects a 15bps rate hike to 0.25%, with a handful of bank still expecting a hold (including CBA, Goldman and HSBC) and nobody expected a greater than 15bps rate hike. Well, everyone was wrong, because a few hours ago, Australia’s central bank – one of the developed world’s last remaining doves turned hawkish – and joined the global tightening bandwagon when it increased interest rates by more than any economists anticipated, rocking markets with a bigger-than-expected interest-rate hike in the middle of an election campaign and signaled further hikes to come, sending the currency and bond yields higher, while stocks slumped.

Abandoned his pledge of just two months ago to remain patient, Reserve Bank Governor Philip Lowe topped economists estimates by raising the cash rate 25 basis points to 0.35%, defying expectations for a hike of 15 basis points. It was the first time borrowing costs had been lifted in an election campaign in almost 15 years. That move and suggestions that more hikes will follow sent benchmark three-year bond yields soaring through 3% for the first time in eight years.

“The RBA managed to wrongfoot every forecaster and even the market — no one was braced for 25 basis points,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. Economists’ consensus was for a 15 basis-point hike.

Pouring gasoline on the hawkish case, the RBA forecast for 2022 is that headline inflation will accelerate to about 6% and core inflation will rise to around 4.75%. The RBA targets inflation of 2-3%. In response to a question about why the RBA had previously guided against rate hikes, Lowe said that “Inflation has surprised everyone on the upside.”

…click on the above link to read the rest of the article…

Aussie Reserve Bank, Considering “Extreme Measures”, Admits “We’re Almost Out Of Ammo”

August 18, 2019

Aussie Reserve Bank, Considering “Extreme Measures”, Admits “We’re Almost Out Of Ammo”

At least one reserve bank globally is starting to ponder the question that many central banks across the world will soon inevitably be asking: what happens if we cut to zero and the economy continues to falter?

This has led Australia to start considering QE, following in the footsteps of a world full of central bankers all offering each other as much confirmation bias necessary to continue to walk down the path of eventual economic destruction.

In Australia, the reserve bank has cut to 1% and “nobody expects them to stop cutting,” according to News.com.au. The bank released this chart days ago, showing that market is expecting further cuts.

The average of all expectations is for the market to fall to 0.37% by September 2020. That exact outcome is described as “unlikely”, but the RBA could have rates at 0.25% or 0.5% by then. That would only leave room for one or two more cuts before rates are at zero.

Then what? Destroy your currency and print your way out of your problems.

Apparently convinced that economies only exist as permanent booms now, the RBA said last week that it would begin a program similar to QE in the United States, wherein the central bank would buy financial assets in exchange for cash. The RBA is considering buying Australian government bonds.

“We could take action to lower the risk-free rates further out along the term spectrum,” said the RBA Governor.

Justifying this nonsense, the article then gives the quintessential example of how QE bond buying works in practice:

Bonds are how the government borrows. Here’s how it works in simplified terms:
The government offers to sell a piece of paper that says, “Australia will pay you back a million dollars in 10 years” (a 10-year bond).
Someone buys that for, let’s say, $900,000.

…click on the above link to read the rest of the article…

How Twisted Minds Function

August 3, 2017

How Twisted Minds Function

The economic theories arising out of Australia are both amusing and frightening. In the latest bit of madness, an economist pleads for more inflation, blaming cheap overseas retailers for Australia’s housing bubble.

For mocking purposes only, please consider How Cheap Overseas Retailers are Pushing Up House Prices in Australia.

“DOWN Down! Prices are Down!” It’s a jingle that is practically our national anthem. But ever-cheaper retail — and the waves of foreign retailers competing on price — could seriously unbalance Australia.

“Down, Down” might be the only place our economy has left to go if we can’t solve the imbalance between crazy low retail prices and crazy high house prices.

Australia needs a little bit of inflation. Without it, our economy is stuck with low interest rates and all the issues they create. But inflation is turning out to be very hard to generate.

The world’s discount retailers have discovered Australia. Aldi, Costco and Uniqlo were wave one of the discount invasion. Wave two is coming in 2017 and mostly involves Amazon. Every retailer already here is working hard to be able to compete.

Prices keep falling and the RBA is finding life difficult. Its job is to keep inflation in line. It should be between two and three per cent per year. But for a while now inflation has been below that range.

You can almost imagine RBA governor Philip Lowe stomping round his office, muttering “bloody foreigners! Coming over here! Making our retail goods cheaper!”

Having low inflation is a problem. While of course we love low prices, overall the economy runs best with consistent predictable inflation. That’s what the RBA is supposed do. It is pledged to makes sure inflation is predictable: between two and three per cent.

The Think Engine

That bit of economic nonsense was courtesy of economist Jason Murphy. He publishes the blog Thomas The Thinkengine. You can follow Jason on Twitter @Jasemurphy.

…click on the above link to read the rest of the article…

Australian dollar skids to six-year low after RBA shock

February 3, 2015

Australian dollar skids to six-year low after RBA shock

(Reuters) – The Australian and New Zealand dollars weakened further in early trade in Europe on Tuesday after a sell-off following the Reserve Bank of Australia’s surprise decision to cut interest rates.

The outlook for both Antipodean currencies has worsened in recent weeks with concerns about growth generating expectations of generally looser monetary policy, but the RBA’s decision still came as a shock to many.

Another burst lower as Europe came on line brought the Aussie’s losses on the day to more than 2 percent. It hit an almost 6-year low of $0.7635 while the kiwi fell 1.5 percent to $0.7185, its lowest since early 2011.

“Its a big move and I think any bounce should be sold into,” said Graham Davidson, a spot trader with National Australia Bank in London.

“Generally when the RBA move, they tend to cut a handful of times. The feeling is of aneconomy where there is no source of growth, almost of despair.”

…click on the above link to read the rest of the article…

Tag Archives: rba

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Latest Posts