RBA Stays The Course, Markets Focus On US Elections
The week will be full of important interest rate decisions, not forgetting the aftermath of the US presidential elections which is likely to affect stock markets across the world.
With US citizens already casting their votes, the Reserve Bank of Australia (RBA) was the first central bank to announce its decision to keep rates on hold. The post-meeting statement said that borrowing costs would need to remain restrictive for the time being while the board sees inflation returning sustainably to its target range in 2026. The Australian dollar gained ground against the US dollar after the RBA’s announcement.
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RBA Interest Rate Decision
The RBA’s governing board decided to keep interest rates unchanged after its meeting earlier on Tuesday. This was the eighth consecutive time that Australia’s central bank has kept borrowing costs on hold. The decision was in line with market expectations.
The RBA Governor Michele Bullock did not give any clues regarding the potential for rate cuts or rises in 2025. Bullock said that inflation has fallen substantially since the peak at the end of 2022 but added that “underlying inflation in the September quarter is still too high.”
Replying to reporters’ questions regarding potential differences between the government’s and the RBA’s economic policies, Michele Bullock said: “I think they’re focusing on what’s happening with private demand, which is particularly weak. We’re saying that aggregate demand is still above the ability of the economy to supply. So even though it’s not growing, it’s still above aggregate supply.”
RBNZ Says Economy Hurt By Multiple Factors
The Reserve Bank of New Zealand (RBNZ) releases its semi-annual Financial Stability Report which indicated an array of factors that have made the country’s economy struggle. The report mentioned that financial hardships have given unemployment a boost while also delaying business investment plans.
The RBNZ’s analysts stressed that “rising unemployment is starting to create acute financial difficulties for some households” and added that the trade environment has become more difficult for businesses as demand is weak and profitability has fallen.
On Monday, the RBNZ’s Governor Adrian Orr told reporters that the real economy was lagging the interest rate cuts and getting through that lag was a concern, noting that “you don't want surprises or shocks to the downside during that period.” The New Zealand’s central bank expects the economy to contract in the third quarter and has already cut rates by 75 basis points since August.
OPEC+ Decision Drives Oil Prices Higher
OPEC+ decided to extend voluntary production curbs for one month more. This means that a part of oil production that was scheduled to enter the market in December has been delayed by a month, and some analysts suggest maybe even for longer.
OPEC+ Secretary General Haitham Al Ghais said at an energy industry event in the UAE that “there are some challenges, but the picture is not as negative as some make it sound.” Commenting on oil demand, Ghais mentioned that “it reminds me of all the talk on peak supply many years ago. Peak supply never happened and peak demand won't happen as the world keeps growing,” adding that group was upbeat on the global economy as the US and Chinese economies grow.
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