MNI BRIEF: Trade War To Increase Volatility Inflation -Panetta

MNI China Daily Summary: Friday, November 15

MNI BRIEF:China Optimistic On Property Despite Investment Fall

CORRECTED-MNI INTERVIEW: NBH To Hold Rates

MNI BRIEF: China Oct Retail Sales Surge On Holiday, Trade-ins

CHINA OCT INDUSTRIAL OUTPUT +5.3% Y/Y VS MEDIAN +5.5% Y/Y: NBS

EZ/UK Bond Supply Calendar: EU Synd; SK, BE Auction on Monday

MNI: US SEP BUSINESS INVENTORIES +0.1%; SALES +0.3%

MNI: US OCT INDUSTRIAL PROD -0.3%; CAP UTIL 77.1%

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

MNI EXCLUSIVE: German Turmoil Dashes EU's Joint-Funding Hopes -Officials

FED: Powell's Time Looks Up, Replacement Could Be Less Willing To Cut Rates?

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

Can Tighten Financial Conditions By Keeping Rates On Hold

RBA
Homepagemarkets-real-timeBulletMarketsFixed Income BulletsForeign Exchange Bullets

The August 6 meeting minutes showed that the RBA Board felt that it could achieve the same tightening of financial conditions as a rate hike by holding rates steady longer than the markets had assumed. It remains concerned about the slow return of inflation to target and possible upside risks and as a result “it was unlikely that the cash rate target would be reduced in the short term.” The Board remains “vigilant” and even more data dependent given the uncertainty around its forecasts. Rates are likely to be on hold for some time.

  • One of the key arguments for a rate hike was greater excess demand than originally believed. The minutes provide more details on this thinking. There had been a “reassessment of the economy’s current spare capacity” as well as an increase in demand expectations, which increased the gap between supply and demand, but estimates were “highly uncertain”. But this could have justified “an immediate increase” in rates.
  • The risk of inflation not returning to target within a “reasonable timeframe” was also given as a reason for tightening, as the there was only limited “tolerance” of pushing the timing out further. Rates would have to be higher than market pricing used in the updated forecasts to “bring inflation sustainably back to target within a reasonable timeframe”. Policy appears to be on an extended pause.
  • Other reasons for a hike were persistence of core inflation and cost pressures, and moderate easing in financial conditions.
  • It opted to extend the pause as keeping rates unchanged would tighten financial conditions, balance the inflation/labour market risks, Q2 disinflation was broad based, inflation/labour market are expected to ease, uncertainties, market expectations & volatility, and insufficient data to warrant a change.
287 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

The August 6 meeting minutes showed that the RBA Board felt that it could achieve the same tightening of financial conditions as a rate hike by holding rates steady longer than the markets had assumed. It remains concerned about the slow return of inflation to target and possible upside risks and as a result “it was unlikely that the cash rate target would be reduced in the short term.” The Board remains “vigilant” and even more data dependent given the uncertainty around its forecasts. Rates are likely to be on hold for some time.

  • One of the key arguments for a rate hike was greater excess demand than originally believed. The minutes provide more details on this thinking. There had been a “reassessment of the economy’s current spare capacity” as well as an increase in demand expectations, which increased the gap between supply and demand, but estimates were “highly uncertain”. But this could have justified “an immediate increase” in rates.
  • The risk of inflation not returning to target within a “reasonable timeframe” was also given as a reason for tightening, as the there was only limited “tolerance” of pushing the timing out further. Rates would have to be higher than market pricing used in the updated forecasts to “bring inflation sustainably back to target within a reasonable timeframe”. Policy appears to be on an extended pause.
  • Other reasons for a hike were persistence of core inflation and cost pressures, and moderate easing in financial conditions.
  • It opted to extend the pause as keeping rates unchanged would tighten financial conditions, balance the inflation/labour market risks, Q2 disinflation was broad based, inflation/labour market are expected to ease, uncertainties, market expectations & volatility, and insufficient data to warrant a change.