The economic week in review
Below is CBA economist Lucinda Jerogin’s round-up of this week’s economic and housing data: Key points: The RBA hiked the cash rate 25bps on Tuesday to 4.60%, its highest level in 15 years. The decision was unanimous. We expect for the RBA to be on hold from here, but risks are heavily skewed to another The post The economic week in review appeared first on MacroBusiness .
This week saw the RBA increase the cash rate by 25 basis points to 4.60%, the highest level in 15 years. The decision was unanimous and marked the fourth rate hike this cycle. The RBA stated that inflation remains too high, driven by domestic capacity pressures, global shocks from the Middle East conflict, and the AI boom. Despite clear signs of slowing in the economy and a loosening labor market, inflation remains the Board's top priority.
However, Governor Bullock acknowledged that monetary policy's lagging effects mean the four rate hikes will take time to impact the economy. The Board is now viewed as being on the fence for another hike, with November's meeting expected to remain a live one. Inflation data showed some pullback from July's spike, but underlying inflation remains elevated.
Headline inflation rose 0.7% seasonally adjusted, while the trimmed mean measure eased from 0.5% to 0.2%. Market services inflation remained firm at 4.1% annually. Household spending data revealed a slowdown in consumption, with August showing no growth after July and June's gains. The shift toward essentials, driven by higher fuel costs, may signal households pulling back due to cost-of-living pressures.
The housing market continues to deteriorate, with national home prices falling 1.1% in September, the sixth consecutive monthly decline. Total dwelling approvals declined 6.1% monthly in August. In the US, consumer confidence fell to its lowest level since 2014 amid high prices and the Iran conflict. The Fed's September meeting minutes are anticipated to provide more insight into the debate on tightening and potential further increases.
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