RBA Keeps Rates On Hold, RBNZ Likely To Keep Them Steady
Interest rates coming from the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) will likely overshadow other financial data releases at the beginning of this week. Both central banks raised borrowing costs quickly to combat rising consumer prices and have entered a consolidation phase.
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RBA Interest Rate Decision
The RBA’s board kept interest rates unchanged as most market analysts had expected. This was the first governing board meeting headed by Michele Bullock, the bank’s newly appointed governor.
The post-meeting statement said that some further monetary policy tightening may be required, adding that “inflation in Australia has passed its peak but is still too high and will remain so for some time yet.” The RBA forecasts that CPI inflation will continue to decline and return within the 2–3% target range in late 2025.
RBNZ Interest Rate Decision
The RBNZ’s board is expected to announce its decision on interest rates on Wednesday. Market analysts suggest that New Zealand’s central bank is likely to keep borrowing costs unchanged. If rates are kept on hold, it would be the third consecutive month as the RBNZ’s policymakers believe that rates are high enough to put pressure on inflation.
The RBNZ was one of the first central banks to implement a tighter monetary policy. Economists at the UOB Group said that the higher-than-expected GDP Q2 2023 figures could force the RBNZ to proceed with one more rate hike but not immediately. Their report said: “ There is a risk that the Reserve Bank of New Zealand (RBNZ) may raise its official cash rate (OCR) once more by 25bps. But we think the RBNZ will opt to pause in Oct, and will likely wait till the 29 Nov monetary policy meeting, with the benefit of having the 2Q23 CPI figures (17 Oct).”
Eurozone Retail Sales August 2023 Report
On Wednesday, Eurostat will release its August retail sales report which is expected to show how the retail sector reacts to the ECB’s monetary policy changes. Market analysts suggested that retail sales might record a negative figure once again following July’s -1.0% drop.
A report by the European Commission (EC) noted that “in July 2023, the seasonally adjusted volume of retail trade decreased by 0.2% in the euro area and by 0.3% in the EU, compared with June 2023.”
World Bank Downgrades East Asia And Pacific Growth Forecast
World Bank’s analysts downgraded their East Asia and Pacific growth forecast from 5.1% to 5.0% in 2023. Their 2024 growth forecast was also reduced from 4.8% to 4.5%. The report by the World Bank said that China’s sluggish economic expansion combined with high interest rates were the main reasons for the reevaluation.
The Washington-based institution referred to the growing corporate debt in Thailand, China and Vietnam. Regarding China’s economy, the World Bank’s analysts said that “while domestic factors are likely to be the dominant influence on growth in China, external factors will have a stronger influence on growth in much of the rest of the region.”
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