PREVIOUS TRADING DAY EVENTS 04 July 2023

The Reserve Bank of Australia RBA yesterday announced its decision to keep rates unchanged, stating that more time is needed to assess the impact of past hikes. However, it made it clear that further tightening might be needed to bring inflation down. 

RBA Governor Philip Lowe In light of this and the uncertainty surrounding the economic outlook, the Board decided to hold interest rates steady this month.

Lowe highlighted the warning that some further tightening of monetary policy might be required as inflation is still too high and will remain so for some time yet.

Todays decision to pause rate hikes shows the RBA has realised the economy is on a knifes edge and that it must pivot to achieve its goal of threading a narrow path through current economic conditions, said Stephen Smith, Deloitte Access Economics partner.

The RBA surprised markets by resuming its hikes both in May and June.

Economic data over the past month have been mixed. Inflation cooled, but the strong jobs report and retail sales are pushing for more hikes. Data suggest that financial conditions might have not been tight enough.

With the labour market still very tight, house prices rebounding strongly and unit labour costs surging, another 25bp rate hike in August still looks likely and we suspect the Bank will follow it up with another one in September, said Marcel Thieliant, a senior economist at Capital Economics.

The central bank currently forecasts…