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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.
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MNI STATE OF PLAY: RBA To Hike Again And Push Rates Over 1%
The Reserve Bank of Australia meets this week with few doubts that the interest rate hikes it began in May will continue as it moves to normalise monetary policy with a careful eye on inflation risks.
The RBA’s overnight cash rate currently stands at 0.85% after a surprisingly large 50 basis point increase in June, and the bank is likely on Tuesday to consider either a 25 or 50 basis point increase at the board meeting to take rates through the 1% threshold.
A 75 bps increase is considered unlikely following comments by RBA Governor Philip Lowe at a Bank of International Settlements event earlier this month, when he largely ruled out the chances of the bigger hike, (See: MNI INSIGHT: 75 Basis Points Hike Unlikely For RBA).
FORWARD GUIDANCE AND DATA
He said the fact that the RBA meets monthly means that it can increase rates in smaller increments than other central banks. The RBA has abandoned forward guidance and now says it will be data driven, although there have not been any significant data releases from the Australian Bureau of Statistics since the last meeting in June.
Building approvals data from the ABS on Monday showed a seasonally adjusted 2.4% fall in May dwelling approvals, suggesting that rising interest rates are already putting the brakes on the economy. Retail trade, international trade and payroll data is due later this week, but the next ABS inflation data is not until July 27.
OTHER SOURCES
The RBA’s own data, released last week, showed a different picture in that credit demand remained steady in May and is growing at an annualised 9%.
The central bank has been relying more on its liaison research programmes, which deliver more time sensitive data, and wages data gleaned from the source was used to justify the May rate hike.
The RBA’s current stance is that it will do all it can to combat inflation, which is currently at 5.1% against the 2 to 3% target range. Underlying inflation, the bank’s preferred measure, is at 3.7%.
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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.