ASX & Wall Street… have we already seen the bottom?
29-11-2022
In a surprising and unprecedented statement at a Senate Estimates Committee meeting yesterday, RBA governor Lowe apologised for forecasting in 2021 that they did not expect the cash rate to go up until 2024. Instead, the RBA has raised rates seven months in a row this year to tame the rising cost of living. He also emphasised that the recent federal budget has not impacted the RBA’s monetary policy.
The RBA will meet for the final time in 2022 next Tuesday before they adjourn until February 2023. The consensus is that they will raise rates by another 25 basis points to 3.1%. A 25 basis point rise will mean that the cash rate has risen by 3% from 0.1% this year, making it the most aggressive monetary policy since the establishment of a 2-3% inflation rate target.
Australian retail sales fell 0.2% in October, well below the 0.5% rise forecasted. This is another economic indicator confirming the impacts of the RBA’s monetary policy on household consumption.
In the US, markets had a shortened week of trading due to Thanksgiving, with all three major indexes rising. Of note were the Federal Reserve Minutes released last week, which revealed that a “substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.” The final US Federal Reserve rate decision of the year is on December 13th and 14th.
Covid lockdowns and protests were ignited in China towards the end of last week as the CCP maintain their zero-covid policy. The prospect of a weaker Chinese economy has driven oil prices to their lowest level since 2021, despite Saudi Arabia’s commitment to oil supply cuts with the OPEC+ nations.
Looking ahead this week there’s a swathe of market-moving economic indicators due to be released. At home, we have private sector credit data, October CPI, Manufacturing/Services PMI, Home Loan data and another Governor Lowe speech. Stateside, there’s November labour market data, GDP growth and consumption data. Finally, the Eurozone November inflation rate is due to be released on Wednesday.
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