The latest RBA’s Statement On Monetary Policy (More than 80 pages) said very little which was new, with inflation not expected to land within their target zone until 2025, with lower growth and higher unemployment. They reconfirmed an expectation rates could still go higher.
They did try to defend corporate profits as not driving inflation…. hum… but not very successfully in my book.
The continued pressures on US Regional Banks highlight the risks created by the changed interest rate environment – even if the scenarios are different from the 2007-8 GFC. But banks are under pressure as margins are compressed, and are needing to revisit their strategies, as both ANZ and Macquarie reposted this week. In fact, a credit crunch could well be on the cards.
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As discussed in The Conversation, the RBA was made subservient for a reason.
As prime minister, Chifley had the principle enshrined in the Commonwealth Bank Act of 1945, and it was later enshrined in the Reserve Bank Act of 1959.
The ultimate supremacy of the government over the Reserve Bank board was hard won – by Labor – and it is easy to imagine circumstances in which a government might need to use it.
Even the knowledge that the trigger is there, never pulled, lets the board know it is not able to go completely rogue and act against the wishes of a democratically elected government.
Chalmers ought to consider the wisdom of keeping his ultimate power in reserve. One day, Chalmers or his successors might wish they had it. The current recommendation to remove it is just plain wrong!
The Fed lifted rates again to 5 to 5.25%, but the press conference did not go to plan and the markets turned to thinking a pivot was likely. Bond yields moved, and concerns about a spreading banking crisis grew, as PacWest said it was looking at options.
Meantime, the FED holds to its view there will be no recession, so no rate cuts.
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After the “surprise” rate hike on Tuesday, the RBA Governor spoke in Perth about the prospect ahead. Reading between the lines it does seem there remains a tightening bias at the RBA, and in line with our expectations, higher rates may still be on the cards, together with a rise in unemployment.
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This was the first in our new live series. Damien Klassen from Walk The World Funds and Nucleus Wealth joined me to discuss the latest market developments. We looked at inflation, earnings estimates, and AI among many other things.
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The leading indicators relating to the US economy are screaming Stagflation, as the FED meets this coming week. Yet rates are likely to go higher to tackle rising costs, even as a credit crunch in underway. Not pretty.
The latest edition of our finance and property news digest with a distinctively Australian flavour.
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Once again, we saw contention in the markets, as US equities extended a rally Friday as investors weighed strong corporate earnings against concerns about regional banks and inflation. Treasuries rose. investors may still be cautious ahead of Apple’s results due next week and the Federal Open Market Committee (FOMC) meeting and the U.S. jobs report for April.
And later in the day, First Republic once again stole the show.
CONTENTS 0:00 Start 0:15 Introduction 0:40 US Markets 2:14 First Republic 3:26 Sentiment and Positioning 4:50 Economic Data 6:30 Oil 7:10 Europe 8:20 ECB Rate Rises? 9:30 ECB Debt As Government Debt 13:15 Asia 16:20 Australia 20:10 RBA Rate Rises? 20:40 Bitcoin Volatility 22:40 Summary and Close
Overall, the S&P 500 gained 0.8% after better-than-expected earnings from the likes of Exxon Mobil Corp. and Intel Corp., up 1.3% and 4% respectively.
However, the gains proved precarious in midday trading after Federal Reserve officials called for broad changes to bank rules in the wake of Silicon Valley Bank’s collapse and promised tougher supervision and stricter rules for banks.
The Nasdaq 100 rose 0.7%, weighed down by Amazon.com Inc.’s 4% loss after a warning over growth in its key cloud computing business.
Meanwhile, After the market close, First Republic Bank tumbled 49% to $1.77 after reports the regional lender was headed for receivership. That was after the bank’s 43% decline in the regular trading session.
In fact the U.S. Federal Deposit Insurance Corp has asked banks including JPMorgan Chase and PNC Financial Services Group to submit final bids for First Republic Bank by Sunday after gauging their initial interest earlier in the week, Bloomberg News reported today.
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Journalist Tarric Brooker and I reconnected following my relocation, for the first in our series of bi-weekly afternoon chats about economics and politics. It may be a couple of months since our last, but in many ways, things are the same…
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The Chief Economist at The Bank of England Huw Pill this week argued that there was a need for restraint to contain inflation. He got significant reaction on socials.
And there is an argument that both Unions and Corporates have a vested interest in bidding wages and prices higher – its their job.
But we parse out this argument and highlight the missing actor which was responsible for creating inflation in the first place, and yet now appears to be blaming everyone else.
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