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Breaking Market Wire, Asia Pacific

04 Jul 2023

RBA: Skips a beat

In what we believe was yet another finely balanced call the RBA held the cash rate steady at 4.1% at today’s meeting. This maintains the cumulative tightening delivered so far this cycle at 400bps. This is the sharpest RBA tightening cycle since at least the early 1980s, and we don’t think the RBA is done. The RBA once again noted that while inflation has passed its peak it “is still too high” and “will remain so for some time yet”. However, considering the sharp increase in rates that has already been put through and uncertainty around the outlook, a decision...

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28 Jun 2023

CPI adds to the AUD’s woes

The AUD continues to fall back down to earth with the larger than expected slowdown in Australia’s monthly CPI indicator the latest piece of news that has exerted pressure on the currency. At ~$0.6640 the AUD is ~3.7% below its mid-June highs. The pull-back has been inline with our thinking, given we believed that the AUD had run too far too fast earlier this month (see Market Musings: AUD: break-out or bull-trap?) Data wise, the monthly headline inflation measure slowed sharply, from 6.8%pa to 5.6%pa in May (market forecast 6.1%pa). This is the slowest annual run rate in headline inflation...

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06 Jun 2023

RBA: hiking until it hurts

In what we think was a finely balance decision, at least in terms of the timing not the direction, the RBA raised the cash rate by another 25bps to 4.1% at today’s meeting. This takes the cumulative tightening delivered since things started in May 2022 to 400bps, by far the most abrupt RBA rate hiking cycle since at least the early 1980s. The RBA reiterated that while inflation has passed its peak, at ~7%pa it “is still too high and it will be some time yet before it is back in the target range”. And in the RBA’s assessment, “recent...

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18 May 2023

Australian labour market: cracks in the veneer

It’s a lagging indicator, but cracks are beginning to appear in the Australian labour market. In our view, these cracks should widen over time as the weight of higher mortgage rates, negative consumer and business sentiment, and other cost pressures act to constrain economic activity. While the larger than normal share of households on fixed rate loans diluted the initial rate hike impacts this cycle, the result should ultimately be the same. We expect growth to slow materially over the next few quarters as the substantial cashflow hit on the heavily indebted household sector intensifies. Indeed, there is still a...

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02 May 2023

RBA: Once more, with feeling

A ‘pause’ doesn’t last as long as it used to. In a surprise to most analysts and interest rate markets, the RBA raised the cash rate by another 25bps at today’s meeting, taking it up to 3.85%. The move means that a cumulative 375bps worth of rate hikes have been delivered so far this cycle. As our chart shows, this is by far the most aggressive tightening cycle the RBA has unleashed for several decades. According to the RBA, inflation has “passed its peak” but at 7% it is “still too high and it will be some time yet before...

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