Reserve Bank of Australia Stays The Course On Rate Policy

After the Federal Reserve (Fed) and the Bank of Japan (BoJ), it was the Reserve Bank of Australia’s (RBA)turn to leave its interest rates unchanged, in line with market analysts’ expectations.

RBA Interest Rate Decision

The RBA did not surprise global markets as it announced that it would keep interest rates on hold after its governing council monetary policy meeting. This was the fifth time in a row that Australia’s central bank did not adjust its monetary policy. The post-meeting statement released by the RBA notes that “the economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth. While recent data have been mixed,  they have reinforced the need to remain vigilant to upside risks to inflation.”

The Australian dollar edged higher as the RBA’s governor Michele Bullock said that the council didn’t consider any rate cut option. Bullock revealed that there were talks about a rate hike and added that she is “very conscious that high rates are hurting some sectors of the country. Inflation is also hurting the people, so we are focused on bringing it down.”

A Reuters poll, published on June 14th, showed that most economists predict interest rates to remain unchanged next quarter, followed by a 25 basis point cut to 4.10% in the final quarter of this year.

ONS To Publish UK CPI Inflation May 2024 Report

Early on Wednesday morning, the Office for National Statistics (ONS) will release its CPI inflation report for the month of May. Economists suggest that the UK’s inflation could come in at 0.4% on a month-to-month basis, ticking slightly higher than April’s reading.

Some economists forecast that inflation could hit 2%, on an annualised basis, putting pressure on the Bank of England (BoE) to reconsider a rate cut. According to the BoE’s latest forecasts, inflation is expected to reach the 2% target, go below the 2% benchmark for some time, before surging again to 2.5% later in the year.

It should be noted that headline inflation rose by 2.3% in the 12 months to April, down sharply from March's 3.2% increase and its lowest level recorded since July 2021.

US Retail Sales May 2024 Report

The US Census Bureau will announce the retail sales figures for May 2024 on Tuesday. Economists expect the figure to come in at 0.2% on a month-to-month basis, slightly higher than the 0% recorded in April. Commenting on the April report, market analysts had suggested that consumer spending was showing signs of decline with disposable income and personal saving rates.

The National Retail Federation (NRF) reported on Monday that US consumer spending on goods rebounded in May from April’s flat results. Retail sales, excluding cars and gasoline, were up 1.35% on a monthly basis and 3.03% higher on an annualised basis. NRF’s analysts noted that “spending is being supported by the job market and real wage gains. Inflation remains stubborn but is almost entirely in services rather than retail goods. May’s year-over-year gains are in line with what we saw earlier this year, and the month-over-month increases are the largest in more than a year. We believe this underscores that April’s moderation was an outlier.”

Fed’s Kashkari Says December Rate Cut Reasonable Option

Minneapolis Federal Reserve President, Neel Kashkari, told CBS reporters that “we're in a very good position right now to take our time, get more inflation data, get more data on the economy, on the labor market, before we have to make any decisions. We're in a strong position, but if you just said there's going to be one cut, which is what the median indicated, that would likely be toward the end of the year.”

Kashkari mentioned that the labour market has withstood the unprecedented onslaught of record-high interest rates in the last two years, but he added that he does expect some cooling to take place in the next months.

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