Latest news with #Reserve Bank
ABC News
an hour ago
- Business
- ABC News
RBA meeting minutes reveal plan for 'cautious and gradual' rate cuts clashed with unemployment 'surge'
They say hindsight is 20-20, but three members of the Reserve Bank board are likely to turn up at the next meeting with the strong temptation to say, "we told you so". The RBA has released the minutes from its meeting two weeks ago, when interest rates were left on hold, catching the market and most private-sector economists off guard. That decision to keep rates steady was made by a six to three majority, with the minority arguing there was no need to wait. "The case to lower the cash rate target at this meeting rested on a view that there was already sufficient evidence to be confident that inflation was on track to be sustainably back at the midpoint of the target range, if not lower," the minutes revealed. The minority in favour of a cut argued that US tariff policy would be a drag on future global economic growth, that Australia's economic expansion remained "subdued", households were saving more, wages growth and services inflation were weakening, and that "recent data suggested a loss of momentum in activity". "Moreover, there was uncertainty around whether market sector employment growth would increase by enough to offset an expected slowing in non-market sector employment growth to maintain momentum in overall employment growth," the minutes showed. That last concern appears to have since been vindicated by another weak set of jobs numbers, released last week, showing unemployment had jumped from 4.1 per cent in May to 4.3 per cent in June, seasonally adjusted, although some analysts have attributed the scale of that increase to statistical variation. At her post-meeting press conference, RBA governor Michele Bullock said the disagreement among the board was not one of where rates should head, but merely the timing of further rate cuts. This is reflected in the formal minutes from the meeting. "All members agreed that, based on the information currently available, the outlook was for underlying inflation to decline further in year-ended terms, warranting some additional reduction in interest rates over time," the minutes noted. The majority who decided to keep interest rates on hold based their decision on a few key elements. Unlike the minority, most board members interpreted recent economic data as surprisingly upbeat, including the very monthly inflation figures that had prompted some market economists to bring forward their rate cut forecasts from August to July. "Monthly indicators of inflation had been marginally higher than were consistent with the staff's forecast for underlying inflation in the June quarter, growth in private demand in the March quarter had been a little stronger than expected and conditions in the labour market had so far not eased as anticipated," the majority argued. They also said that global economic outcomes had so far been more benign than feared at the previous May meeting, when rates had been cut, reducing the urgency for another rate cut. "Members noted that the baseline forecasts already incorporated some deterioration in global economic conditions because of higher tariffs and policy uncertainty, which was consistent with the evidence currently available on how the trade tensions and other factors might be resolved," the minutes revealed. "Moreover, the forecasts had been conditioned on a relatively modest and gradual path of further easing of monetary policy over the period ahead." After two rate cuts, the majority of the board was also concerned that it would be difficult for the RBA to know exactly when monetary policy had changed from being restrictive — that is, holding back economic growth — to neutral or boosting activity. Given the degree of uncertainty around what the current "neutral" level of the cash rate is, the majority argued that "lowering the cash rate a third time within the space of four meetings would be unlikely to be consistent with the strategy of easing monetary policy in a cautious and gradual manner". Despite the expressed caution of the majority on the RBA board, Abhijit Surya from Capital Economics expects rates to fall at next month's meeting on August 11-12, with further cuts to follow. "With the unemployment rate having surged in June and timely indicators suggesting that activity and inflation both remain subdued, the bank will almost certainly resume its easing cycle in August," he noted. "Looking further ahead, we expect the board to cut rates to 2.85 per cent by mid-2026, in line with the bank's stated goal of ensuring that monetary policy is no longer restrictive. "Our terminal rate forecast is below the 3.1 per cent currently predicted by the analyst consensus." Either way, that implies between three and four more rate cuts from the current cash rate of 3.85 per cent, unless the market has again misread the degree of caution among the majority of RBA board members.
Daily Mail
3 hours ago
- Business
- Daily Mail
BREAKING NEWS Major blow for millions of Aussies with a mortgage - as Reserve Bank boss makes a grim admission
The Reserve Bank has declared it's in no rush to cut interest rates after surprising financial markets this month by keeping them on hold. The minutes of that July 8 meeting, released on Tuesday, have revealed the RBA's monetary policy board was worried about cutting rates again too soon, on the back of relief in February and May. 'They believed that lowering the cash rate a third time within the space of four meetings would be unlikely to be consistent with the strategy of easing monetary policy in a cautious and gradual manner to achieve the board's inflation and full employment objectives,' it said. 'While the flow of recent data had been broadly in line with earlier forecasts, they judged that some data had been slightly stronger than expected.' The RBA this month kept rates on hold at 3.85 per cent, surprising economists at the Big Four banks and financial markets, which had regarded relief as a 97 per cent chance. The experts had expected a July 8 cut after monthly headline inflation data for May showed the consumer price index falling to just 2.1 per cent, putting it on the low side of the Reserve Bank's two to three per cent target. They had ruled out the RBA waiting until August 12 following the late July release of June quarter inflation data. The Reserve Bank's July meeting minutes also expressed concern about headline inflation increasing from late 2025 following the expiry of $75 quarterly electricity rebates in December. 'Looking ahead, headline inflation was expected to pick up temporarily to around the top of the target range in late 2025 and remain there in 2026, reflecting the currently legislated unwinding of government energy subsidies to households,' it said.
Bloomberg
4 hours ago
- Business
- Bloomberg
RBA Saw July Rate Cut as Inconsistent With ‘Cautious' Strategy
Australia's central bank decided that lowering interest rates for a third time in four meetings would not be consistent with its strategy of easing in a 'cautious and gradual' manner, minutes of the July meeting showed. The Reserve Bank 'observed that it might be prudent to lower interest rates cautiously as the required degree of policy restrictiveness declines,' according to minutes of its July 7-8 board meeting released in Sydney on Tuesday. The case to leave the cash rate at 3.85% was the 'stronger one,'a majority of members concluded.
News.com.au
2 days ago
- Business
- News.com.au
Freeze grips home sales after RBA moves leave homeowners in limbo
Mounting speculation over further interest rate cuts has spurred a winter freeze across the Sydney housing market as buyers and sellers await the outcome of the next Reserve Bank rates decision before making a move. PropTrack's June 2025 Listings Report has revealed a 13 per cent decline in new listings across Sydney over the past month. Current listings are also about 5.2 per cent lower than at the same time last year. Many of the homeowners delaying plans to sell their homes are likely to also be buyers, with upsizers and downsizers normally making up a significant share of the buyer pool. A slump in new listings has occured as total listings rise, suggesting a market where buyers have a large selection of older listings but few fresh options. It's an anomaly on the east coast when compared to other capitals like Melbourne and Brisbane, where both new and total listings have declined since last year. PropTrack economist Angus Moore said the data demonstrated that Sydney properties were spending longer on the market recently. 'The fact we're seeing a bit more stock on market despite a smaller flow of new listings reflects homes taking a little longer to sell than they were a year ago,' he said. 'Though the difference isn't large, and homes are still selling faster than they were pre-pandemic.' With a prospective cash rate cut in the future, Mr Moore said things would soon improve for sellers. 'We're expecting to see a couple more rate cuts this year,' he said. 'Coupled with the fact Sydney home prices have been consistently increasing this year after a soft period in late 2024, that's likely to support vendor confidence.' Scerri Auctions director Chris Scerri said compared to June last year, auction figures were 'a little bit down'. He added that this kind of decline was seasonal and sales would 'increase significantly' come Spring, and that future rate cuts would also provide a boost to buyer confidence, auction turnouts and bids. 'As soon as there's talk of an interest-rate cut, (loan) applications and reapplications increase,' he said. 'That just gives more confidence which means increased buyer numbers.' 'At the moment our average buyer number is about 3.5 per auction, and then of those buyers about 50-60 per cent are actually bidding.'
Yahoo
5 days ago
- Business
- Yahoo
Australian Unemployment Unexpectedly Jumps to Four-Year High
(Bloomberg) -- Australian unemployment unexpectedly climbed to a four-year high in June as hiring almost stalled, suggesting a loosening of the labor market and bolstering the case for the Reserve Bank to reduce interest rates next month. The Dutch Intersection Is Coming to Save Your Life Advocates Fear US Agents Are Using 'Wellness Checks' on Children as a Prelude to Arrests LA Homelessness Drops for Second Year Manhattan, Chicago Murder Rates Drop in 2025, Officials Say The currency declined by more than a half percent as the jobless rate increased to 4.3%, the highest level since November 2021 and exceeding forecasts for an unchanged 4.1%, data from the Australian Bureau of Statistics showed Thursday. Employment rose by 2,000 driven entirely by part-time roles, against economists' expectations of a 20,000 gain. The yield on policy-sensitive three-year government bonds fell almost 10 basis points while stocks advanced. Money market bets firmed to fully price a cut in August and another after that, with a better than 50% chance of a third. The data is crucial for RBA policymakers as the resilience of the labor market, and worries about it rekindling price pressures, have been key reasons why they've shown patience in the current easing cycle. The central bank has cut twice since the start of the year — shocking the market last week with a decision to hold — and today's weak report, following a subdued reading in May, could suggest a turn in fortunes. 'The consecutive poor jobs prints and the jump in unemployment rate to 4.3% is likely to spook the RBA,' said Alex Loo, a macro strategist at Toronto-Dominion Bank in Singapore. 'Investors are likely to read that the RBA may opt for consecutive cuts in August and September now.' The central bank's board said after its shock pause at 3.85% that it wanted to wait for further evidence that inflation was sustainably hitting the midpoint of its 2-3% target. The quarterly CPI report due on July 30 is seen as the next major reading for the policy outlook. What Bloomberg Economics Says... 'Even with this soft patch, the labor market remains tight. That should allow the central bank to continue to pursue a gradual pace of easing.' — James McIntyre, economist. — For the full note, click here. Others are more downbeat. The data 'support our view that Australia's labor market is no longer tight and should not be a barrier for further cuts,' said Andrew Boak, chief economist for Australia at Goldman Sachs Group Inc. Australia's economic momentum remains subdued with consumer confidence and household spending tepid. Global uncertainty is also elevated in the run-up to President Donald Trump's tariff deadline on Aug. 1. The trade uncertainty is weighing on business investment and prompting firms to rethink hiring plans, economists said. Even though Australia got off lightly with a 10% baseline tariff rate, as an export-reliant economy its fortunes are heavily geared to those of its trading partners. 'Today's data will reinforce the weakness that is continuing within the private side of the Australian economy,' said Brendan Rynne, chief economist at KPMG, 'and by itself should be enough for the RBA to drop the cash rate at its next meeting.' Australian Prime Minister Anthony Albanese is in China this week as he looks to boost ties with his country's No.1 trading partner in order to generate local jobs and spur the domestic economy. The two sides agreed to keep expanding engagement in bilateral trade, climate change and people-to-people links, they said in a joint statement on Tuesday. Thursday's jobs report also showed: Annual employment growth was 2% versus an average of 3.4% between 2022 and 2024 The participation rate rose to 67.1% Full-time roles dropped by 38,200 while part-time positions advanced by 40,200 Underemployment rose to 6% while under-utilization climbed to 10.3% --With assistance from Matthew Burgess. (Updates markets, adds comments from analysts.) How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All Forget DOGE. Musk Is Suddenly All In on AI How Hims Became the King of Knockoff Weight-Loss Drugs Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot The Quest for a Hangover-Free Buzz ©2025 Bloomberg L.P. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
