Interest Rates

Yesterday’s June labour force data has made a rate increase certain when the RBA meets on August 2. It is now all about the size – 0.50% like in June and the RBNZ on Wednesday, or 0.75%.

As widely expected, the RBA lifted its key interest rate by 0.50% for a second time in a row on Tuesday, a decision that will be followed by home loan rate rises from the banks.

While the looming rate rise hogs the local spotlight, the important US jobs figures on Friday and other start of month data releases will dominate thinking globally.

Speaking to the American Chamber of Commerce in Sydney on Tuesday, RBA Governor Phillip Lowe restated the bank’s willingness to do whatever was needed to rein in inflation.

After weeks spent urging central banks to boost rates as hard and fast as possible to get ahead of the inflationary curve, global markets suddenly seem to find the wish-fulfilment unpalatable.

61,000 new jobs were found last month and the jobless rate remained at a 48-year low of 3.9%, increasing the chances of another 0.50% or perhaps even 0.75% rate rise on July 2.

Ahead of the US Federal Reserve’s increase in its key indicator rate, Reserve Bank Governor Philip Lowe gave a rare public interview between bank board meetings.

The RBA has followed its peers in the US and New Zealand, lifting its key cash rate by a large 0.50% to 0.85%, while making it clear increases will continue for some months to come.

The consensus for today’s rise in the Reserve Bank’s cash rate now seems to have shifted from 0.4% to 0.25%, which would put the key rate up to a somewhat untidy 0.60%.

A rate rise is guaranteed when the RBA meets tomorrow and, as was the case in the run-up to the May meeting, the speculation is about the size of the increase and those to follow it.

Wall Street has fallen in behind the US Federal Reserve’s hawkish approach to bashing inflation lower with a series of 0.50% rate rises and seems ready to cop whatever the central bank delivers over the rest of 2022.

No messing about with inflation across the Tasman as the RBNZ revealed its second 0.50% increase in the official cash rate, taking it to 2% – the highest it has been for six years.

Having lifted rates once, the Reserve Bank says it will do so again – following the script used by the US Federal Reserve, along with the central banks of economies both small and large.

The Reserve Bank has lifted its cash rate by a quarter of a per cent to 0.35%, the first time it has done so since November 2010 when the cash rate was raised to 4.75%.

As yields on 10-year Australian bonds hit recent highs on Monday, the RBA is widely expected to at least reveal its hand on rate rises after today’s May monetary policy meeting.

Interest rates may be rising around the world but not in Japan, where the central bank has made it very clear they will not be following suit, even in the face of inflationary and currency pressures.

Ignore the as-expected high March quarter inflation readings released by the ABS on Wednesday and instead focus on what the Reserve Bank will do with them at its May meeting next week.

Fed chair Jay Powell blew up expectations for US monetary policy and rate rises on Thursday by openly suggesting the central bank will lift rates more aggressively over the rest of 2022.

The Reserve Bank of NZ beat the US Fed Reserve to the punch yesterday, following on its move in February of this year by raising its Official Cash Rate 0.5% to 1.50%.

It has been a big week for central banks both here in Australia and in the US, and both look almost certain to hold the lion’s share of investor focus for the foreseeable future and beyond.

Some important changes in the language of its post meeting statement on Tuesday are a clear indication that the Reserve Bank has moved closer to lifting interest rates this year.

A game of one-upmanship has emerged among the US punditry since Jay Powell ramped up his rhetoric on Monday with regard to how aggressively the Fed would raise US rates.

Fed chair Jay Powell has once again given financial markets what they have been demanding, but not wanting – a promise to lift rates faster to control inflation.

As widely anticipated, the US Fed raised rates by 25 basis points overnight, but market sentiment was helped by conciliatory statements from China on market stability and listing rules.

While an 0.25% rate rise by the US Fed is almost a foregone conclusion, there’s a decent chance that by the time you are reading this Russia will officially be in default on its debts.