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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

The minutes of the RBA board meeting highlighted the growing tension between the signals from employment and economic activity.  The final paragraph of the minutes suggests the RBA remains “finely balanced” and open to acting quickly on monetary policy should the unemployment rate starts to rise.

However, the market bulls would have been disappointed last week following the release of another good-news employment report which saw the unemployment rate fall below 5.0% for the first time in almost eight years. This would normally suggest talk of a rate hike (yes, a hike!) but we are clearly a different world these days with low inflation, very little wages growth, house prices falling and consumers carrying record levels of debt. Despite this data essentially endorsing why the RBA has said that “the next move in interest rates could be up or down”, financial markets continue to aggressively price in RBA rate cuts before year-end.

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Source: Rural Bank

 

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