RBA cash rate

[divs4ever]

25bps Cash Rate rise .......... really !!!
Inflation to contiue .....
The RBA lost their bottle !!
US will go more than 25bps, AUD will suffer.
Gunneguy

yes i agree , i was thinking 0.5% ( when 0.75% was actually warranted ) and no rise in November

is this the first sign of a RBA pivot ??

let's see if i am correct about November

on the plus side my tip GEAR rose 10% today ( unfortunately it didn't go low enough yet to entice me to buy any )

 

[divs4ever]

I think that the RBA have got it right.

After the Governor told everyone that Covid would ensure no rate rises until 2024 caused many of our youth to borrow, and then the recent increases have been the fasted in history, there was risk of mortgage defaults and bankruptcies.

The previous two hikes haven't had a chance to bight yet, and they will bight for some.

Interest rate hikes are a blunt tool. I for one do not want the economy to bludgeoned unconscious for the next few years.

My son and his mates are very happy today, and so is my share portfolio.

pain now , or disaster in the months to come , at least Australia should still be in a trade surplus

 

[qldfrog]

Yesterday saw me selling nearly all of my bear and start buying shares as well as usd.the RBA move was even better than expected...
Not for Australia in my view but for my portfolios .
Only issue is i risk being rich in worthless DUP:
down under pesos?

 

[mullokintyre]

Gotta say I was surprised with 25bps.

All of the speeches coming out of the Fed have emphasised that central bankers have been moving in unison to fight inflation globally.
Either Phil Lowe is ahead of the curve or worryingly behind. We'll have to wait for the minutes to be released.

he's been behind the curve for some time.
Surprised they opted for 25 over 50, but then maybe he is hoping that inflation has topped out (fat chance).
Mick

 

[againsthegrain]

I am wondering where we really are, on 1 end 2 days before rba meeting news articles flood us saying how 1/4 Aussies will struggle etc etc
but then I see everybody around actually sepending, shops and restaurants have been pretty full the last 2 weeks when I have been around.

Also to add to inflation vic govt just slammed in another 25m into the market with their 25% rebate program on dining and entertainment. I think this shows that on average people are not really concerned

Business Victoria

Get the guidance, services and skills you need to successfully start, run and transform your business. Includes the latest government grants, workshops and support programs.

www.vic.gov.au

 

[Dona Ferentes]

Surprised they opted for 25 over 50, but then maybe he is hoping that inflation has topped out (fat chance).

With cash rate at 2.60%, they still have the flexibility to round it up 0.15% or down 0.10%, down the track, a bit of 'fine-tuning' (lol) and return to a 'normalised' 25 bip number

 

[mullokintyre]

With cash rate at 2.60%, they still have the flexibility to round it up 0.15% or down 0.10%, down the track, a bit of 'fine-tuning' (lol) and return to a 'normalised' 25 bip number

With the OZ inflation rate running at 6.1% in August, the idea of fine tuning seems somewhat superfluous.
The RBA itiself has forecast inflation to peak at 7.1% in the December 2022 quarter, so why the slowing down now?
Unless they have had a preview of the ABS inflation figures due out in three weeks.
From The ABS

• On 26 October 2022, the ABS will commence publication of a monthly CPI indicator. This first publication will occur alongside the release of the quarterly CPI. Thereafter, the monthly CPI indicator will be published around four weeks after the end of the reference month, starting with the October month release on 30 November. The exception to this will be the November data, which will be published in January.
• The monthly CPI indicator will provide a timelier indication of inflation using the same data collected for use in the quarterly CPI. Each month will include updated prices for between 62 and 73 per cent of the weight of the quarterly CPI basket.
• The quarterly CPI will continue to be Australia’s key measure of inflation
• There will be no changes to the quarterly CPI outputs and release schedule.
• Consistent with existing policy, the ABS does not comment on the use (or otherwise) of the price indexes we publish. However, it should be noted that the monthly CPI indicator may be routinely subject to revision, in contrast to the quarterly CPI which is only revised in exceptional circumstances.

Perhaps the RBA has seen preliminary figures for this monthly Inflation figure, be interesting to see how much agreement there is between the sum of the monthly figures and the quarterly result, given that the monthly figures use a subset of the items used in the quarterly index.

The suggestion that the RBA has some real control over the economy is something I treat with great suspicion.
Mick

 

[Value Collector]

With the OZ inflation rate running at 6.1% in August, the idea of fine tuning seems somewhat superfluous.
The RBA itiself has forecast inflation to peak at 7.1% in the December 2022 quarter, so why the slowing down now?
Unless they have had a preview of the ABS inflation figures due out in three weeks.
From The ABS

Perhaps the RBA has seen preliminary figures for this monthly Inflation figure, be interesting to see how much agreement there is between the sum of the monthly figures and the quarterly result, given that the monthly figures use a subset of the items used in the quarterly index.

The suggestion that the RBA has some real control over the economy is something I treat with great suspicion.
Mick

The RBA pull apart inflation numbers a bit, taking out things that can’t be controlled etc.

For example, they when weighing up whether to increase rates they might give less weight to energy prices and farm prices because these aren’t going to be able to be controlled with interest rates.

Also, it take time for the previous rate rises to kick in, and they have competing objectives, for example they are tasked with keeping both inflation and unemployment low, but these do factors are opposite.

So if it looks like a bulk of the inflation is being caused by external factors and rate increases will have limited effect, they may decide to reduce rate rises to preserve the employment number.

 

[Smurf1976]

The RBA itiself has forecast inflation to peak at 7.1% in the December 2022 quarter, so why the slowing down now?

I think there's an issue in that we've already had several rate rises none of which have had time to see their full effects flow through the economy yet.

Plus we have the fuel excise increase. Whilst not massive in outright $ terms it's nonetheless something that takes money out of consumers' pockets and does so in a highly visible manner. One doesn't need to own a car or even have a drivers' license to see the price boards outside servos on a daily basis and to grasp that there's an impact. It's the most visible of all prices.

Then there's the "wealth effect" bearing in mind the stock market's down and there's been plenty of mainstream media reports about falling property prices.

Put all that together and my thought is consumers will pull back before too much longer. There's got to be a breaking point somewhere surely? A point will come where anyone selling non-essentials loses pricing power.

 

[Value Collector]

I am wondering where we really are, on 1 end 2 days before rba meeting news articles flood us saying how 1/4 Aussies will struggle etc etc
but then I see everybody around actually sepending, shops and restaurants have been pretty full the last 2 weeks when I have been around.

It takes time for the interest rates to kick in, most people have buffers that take time to exhaust before their weekly spend gets squeezed.

Eg.

1. It can take months before credit card balances creep up enough to get people to realise their weekly deficit has grown.

2. It can take months before peoples home loan payments actually rise because due to previous low rates most people are ahead in their payments.

3. It can take months before peoples savings are exhausted.

4, it can take years before fixed rate loans roll off.

But once these things do start to bite we should see consumer behaviour start to bend,

 

[divs4ever]

Yesterday saw me selling nearly all of my bear and start buying shares as well as usd.the RBA move was even better than expected...
Not for Australia in my view but for my portfolios .
Only issue is i risk being rich in worthless DUP:
down under pesos?

actually it is times like this that i remember the first currency ( under British administration ) where silver pesos were imported and the centers were punched out and the coins became known as the holey dollar and the dump ( the punched out core )

turned out rather prophetic ( imo )

 

[divs4ever]

The suggestion that the RBA has some real control over the economy is something I treat with great suspicion.
Mick

WOW ! how polite are you ??

reading on your other posts on how local inflation is calculated ( manipulated ) and most people in my social circle and working class ( or on some sort of Centre-Link support or BOTH ) would probably choke with rage if they understood the subtlety .

luckily ( for governments ) their indoctrination system ( the education system ) worked , and yes they still hurt , but are unable to understand why they are hurting .

BUT maybe the times are a-changing

 

[Smurf1976]

But once these things do start to bite we should see consumer behaviour start to bend,

Another is seasonality.

Energy use is highly seasonal for much of Australia. For those in the mild weather areas I'll point out that heating in particular tends to be a pretty hefty expense in colder places - nothing unusual about people getting huge energy bills turning up about now.

Christmas comes once a year. For some it's largely irrelevant but for others it's a huge expense.

Entertainment is another. Regardless of what you're into, most of it's seasonal. Football in winter, concerts and festivals peak over the warmer months, etc.

Holidays for many are still a once a year thing.

Back to school expenses for those with children.

Even things like car servicing tend to be at most 6 monthly.

 

[mullokintyre]

It takes time for the interest rates to kick in, most people have buffers that take time to exhaust before their weekly spend gets squeezed.

Eg.

1. It can take months before credit card balances creep up enough to get people to realise their weekly deficit has grown.

2. It can take months before peoples home loan payments actually rise because due to previous low rates most people are ahead in their payments.

3. It can take months before peoples savings are exhausted.

4, it can take years before fixed rate loans roll off.

But once these things do start to bite we should see consumer behaviour start to bend,

Just as it takes time for the interest rates to kick in, it takes time for the other side to kick in.
The businesses that have had increases in wages costs, increase in transport/Delivery costs, increases in rents, increases in rates, increases in raw materials etc are also lagging, and those same businesses will still have to pass them on eventually.
I have been staying in the mid coastal area of Western Oz for the past five weeks while Mrs does a locum here.
Its a tourist town, and the school holidays have blown the whole place up with people.
There does not seems to be many holding back on spending here, assuming they could find enough things to spend it on.
Like everywhere else, staffing issues are holding everything back, and nothing seems to be coming along to improve that situation.
The pharmacy where my wife is doing the locum is down 1.5 people, and can't even get anyone in the town to apply for jobs, much less actually find someone suitable.
There is a chronic lack of housing, a chronic lack of tradies, a chronic lack of materials.
She can virtually name her own price for locums, she is getting five or six emails a day asking if she is interested in a locum job somewhere.

 

[Value Collector]

Just as it takes time for the interest rates to kick in, it takes time for the other side to kick in.
The businesses that have had increases in wages costs, increase in transport/Delivery costs, increases in rents, increases in rates, increases in raw materials etc are also lagging, and those same businesses will still have to pass them on eventually.
I have been staying in the mid coastal area of Western Oz for the past five weeks while Mrs does a locum here.
Its a tourist town, and the school holidays have blown the whole place up with people.
There does not seems to be many holding back on spending here, assuming they could find enough things to spend it on.
Like everywhere else, staffing issues are holding everything back, and nothing seems to be coming along to improve that situation.
The pharmacy where my wife is doing the locum is down 1.5 people, and can't even get anyone in the town to apply for jobs, much less actually find someone suitable.
There is a chronic lack of housing, a chronic lack of tradies, a chronic lack of materials.
She can virtually name her own price for locums, she is getting five or six emails a day asking if she is interested in a locum job somewhere.

Yep, it can take time for some cost increases to be passed along, although some some are instant, and the fact that we are seeing inflation means that those costs are already starting to be passed along.

One thing about Central Banks though, the Brake pedal works a lot better that the accelerator pedal, so you don’t want to step to hard on the Brake because once the economy screeches to a halt it can be hard to get it going again, as was seen in the Great Depression.

It’s a delicate balancing act, eg pressing the brake hard enough to slow the vehicle but not causing it to stop completely.

 

[Knobby22]

I think there's an issue in that we've already had several rate rises none of which have had time to see their full effects flow through the economy yet.

Plus we have the fuel excise increase. Whilst not massive in outright $ terms it's nonetheless something that takes money out of consumers' pockets and does so in a highly visible manner. One doesn't need to own a car or even have a drivers' license to see the price boards outside servos on a daily basis and to grasp that there's an impact. It's the most visible of all prices.

Then there's the "wealth effect" bearing in mind the stock market's down and there's been plenty of mainstream media reports about falling property prices.

Put all that together and my thought is consumers will pull back before too much longer. There's got to be a breaking point somewhere surely? A point will come where anyone selling non-essentials loses pricing power.

It's not only the petrol, also the slow winding back of other excesses.

Getting paid for staying home Covid is ending, some of the dodgier government spending and programs will be ending.

I think the next mini budget this month will attempt to control this. There is plenty of loose government money and they want a war chest.

 

[mullokintyre]

The RBA pull apart inflation numbers a bit, taking out things that can’t be controlled etc.

For example, they when weighing up whether to increase rates they might give less weight to energy prices and farm prices because these aren’t going to be able to be controlled with interest rates.

Its an absolute farce to take out things they can't control.
These items still affect the price inputs to goods and services, and most likely on the plus side, so whether its controllable or not is immaterial, the poor sucker paying will not care, they still have to pay.
Mick

 

[Value Collector]

Its an absolute farce to take out things they can't control.
These items still affect the price inputs to goods and services, and most likely on the plus side, so whether its controllable or not is immaterial, the poor sucker paying will not care, they still have to pay.
Mick

It’s not a farce at all, some price changes are temporary caused by other things such as drought and war.

For example, let’s say a drought causes farm prices to rise this year, there is no real point trying to adjust money supply to bring the price of avocados and wheat down when the price rise is justified and will fix itself.

Interest rate rises are designed to fix problems caused by money supply.

So the reason for picking apart the inflation number is to try and get at the facts and figure out what is broad based inflation that needs to be addressed with monetary policy and what is price increases caused by other factors that we need to just deal with.

In a lot of cases higher prices are necessary to stimulate more supply, and raising interest rates can make it worse.

 

[qldfrog]

I wonder if this lower RBA rate is not already impacting the AUD greatly.
If you look at the last hours:US market etc, it is following a well used scenario
US Market great jump, USD falling against euro, British pound, yen etc BUT not the AUD
Whereas other currencies are going strong against the us dollars, we are actually going backward.
On an individual level:
FWIW, on monday, i played heavy bull on the market, sold nearly all bears and bought extra USD exposure and actually moved into to the CHF for some of the cash portion.
All discretionary as my systems are lagging and are nearly 100% cash.

 

[divs4ever]

keep that cash liquid , there is a saying about a politician and a pot of money ( bankers are often just as bad )