RBA Governor Glenn Stevens gave a strong indication that any near term rate movement will have to be down He also has weak inflation data to support such a move. However he did say that the “impact” of the major banks raising interest rates is “not large” suggesting that such a move is not likely to happen next month and perhaps RBA may consider this perhaps in Q1 of 2016.
RBA deputy governor in a speech also took a swipe against the banks’ data “error” in classifying owner occupier loans and investor loans. The investor loans attract higher interest rates but more importantly the investor loan data is factored in by the RBA to manage a build up of risks in the housing sector.
RBA’s statement of monetary policy shows growth projections are still at 3% to December 2016 and underlying inflation for the same period is expected to track at 2.50% right on the middle of the RBA’s target 2-3% band. Outlook for property prices especially in Sydney will come under pressure.
Donald Trump in his inimitable style accused Fed Chief Yellen not raising US interest rates as her political agenda. Whatever may be the case, Yellen seems to be warming people up for a possible lift in rates in December. This will also mean that the RBA will watch the impact of the Fed move before it takes any action on the Australian Dollar. US unemployment recorded a strong growth adding 271000 jobs in October and consequently unemployment fell to 5%. The markets are now forecasting a 70% chance of a rate rise in December.
Markets at a glance
Strong US data led the push towards higher US bond yields during the week. Australia bond yields pushed higher too. Equity markets were generally higher.
| Australia cash rate Australia 90 day bank bill Australia 10y Bond rate US 10y Govt Bonds AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P500 Shanghai Composite Brent Oil (USD per bbl) Gold (USD per oz) Iron Ore (USD per tonne) | This week 2.00 2.19 2.79 2.33 0.7144 0.6564 87.00 4.5370 5215 2099 3590 47.42 1089.80 48.21 | Last week 2.00 2.11 2.61 2.14 0.7099 0.6526 86.12 4.4998 5239 2079 3412 49.56 1142.16 49.83 |
Outlook for this week:
The unemployment data for October will be published on Thursday, 12/11. The NAB business survey comes out on Tuesday. Housing finance data should also provide some confirmation of the slowing housing prices in Sydney.
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