Closing out the week with a discussion on interest rates, inflation and progress.
Progress made, need more. The RBA acknowledged the progress made on inflation but would like to see more before they cut rates. Michelle Bullock made two points here that can be considered as potential markers for earlier rate cuts. First, inflation needs to make further progress towards the RBA band and that the RBA ‘…needs to overachieve’. We believe this means inflation outcomes need to be clearly less than the RBAs forecast for a rate cut to occur. Second, there needs to be no sign of inflation anchoring at a higher level ‘…say at around 3%’. Bullock went on to confirm there was no sign of anchoring so far. While the RBA has moved to a neutral bias, the hurdle to cut rates remains a high one.
Figure 1: Nominal rates have peaked, real rates will peak in 4Q24
Finally, to listen to further insight from Siobhan Blewitt on the current economic trends and data, listen to Siobhan and Libbi Gorr on Enterprise Breakfast, Disrupt Radio, Monday mornings at 7am.
For further insight on economic data, the economy and wealth management strategies, go to fraiscapital.com.
