Australian borrowers have had a reprieve after the Reserve Bank paused its interest rate hikes for only the second time in the past 14 meetings, giving the central bank more time to assess the state of the economy.
The RBA left its official cash rate at 4.1% on Tuesday which is still the highest level in 11 years. Economists had been divided in their forecasts, with about half predicting the pause and the others expecting another 25 basis point increase.
Expectations that the central bank would hold off another rate hike were fanned by the minutes of the RBA’s June board meeting. They said last month’s decision to hoist the rate or leave it unchanged had been “finely balanced”.
Since then, the Australian Bureau of Statistics had released its monthly consumer price index numbers showing headline inflation had retreated sharply in May to 5.6%, the lowest in just over a year. Underlying inflation, though, only edged lower.
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Former RBA board member Warwick McKibbin was among those calling for the central bank to hold off further hiking interest rates. He predicted a global “deflationary shock” was emerging as supply chains recovered from the twin disruptions of the Covid pandemic and Russia’s war on Ukraine.
Excluding April and now July, the RBA has raised the cash rate 12 times since it began tightening monetary policy in May 2022. Tuesday’s pause, though, may only be temporary with most economists and markets expecting the central bank will increase the rate at least one more quarter-point to 4.35% in the coming months before it peaks.
Whether the RBA will resume hiking in August or extend the pause will hinge on the strength of the economic data. Among the key numbers to watch before the 1 August RBA board meeting will be June employment numbers on 20 July and June quarter consumer price index figures on 26 July.
More to come.
2023-07-03 23:31:01
Post from www.theguardian.com
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