20th September 2024
Key points
- Federal Reserve cuts rates by 50 bps
- UK inflation holds steady
- Bank of England keeps rates at 5% pa
- Equities hit all time highs – again
Global Cash Rates & Inflation
- The Reserve Bank of Australia (RBA) Cash Rate now sits at 4.35%pa and the annual inflation rate in the year to July is 3.5%.
- The US cash rate (policy rate) is currently between 4.75%-5.0%pa and the annual inflation rate in the year to August is 2.5%.
- The Bank of England Bank Rate currently sits at 5.0%pa with an inflation rate of 2.2% in the year to July.
- The European Central Bank Cash Rate (deposit facility) is 3.5%pa, with an annual inflation rate of 2.2% in the year to August.
Federal Reserve Cuts Rates By 50 Bps
The Federal Reserve has announced a 50-basis point cut to its benchmark interest rate, the first time it has cut rates since 2020.
U.S. inflation fell to a 3-year low last week and unemployment has been steadily rising. It is widely expected that the U.S. will cut by at least another 25 bps this year.
The move follows several other central banks cutting rates in the last few months, including the European Central Bank, Bank of Canada, and the Bank of England, and was closely followed by several Gulf central banks including Saudia Arabia, the United Arab Emirates and Bahrain.
UK Inflation Holds Steady
The annual inflation rate in the UK continues to hover above the Bank of England’s target of 2%, inviting the prospect of further rate cuts in the near future.
UK economic data released last week shows that GDP is faltering, flatlining for a second month in July after rebounding strongly in the previous months.
As is the case in many advanced economies, the focus is now shifting to the economy as the outlook for inflation becomes more certain.
Bank of England Keeps Rates at 5%
Despite the current inflation rate in the UK and the prospect of further rate cuts later this year, at its meeting this week, the Bank of England has maintained its Bank Rate at 5%pa, holding steady amid ongoing economic fluctuations.
Equities Hit All Time Highs - Again
Despite declining oil prices and soaring gold prices, which could signal a potential recession, major equity indices continue to make new all-time highs, showing little concern over the increasing uncertainty from weakening global growth, growing geopolitical instability, and the upcoming U.S. election. It remains to be seen whether equities are correctly accounting for the risks to earnings and growth, and with valuations at elevated levels, any revaluation could happen rapidly and sharply.
ABE Attends the Swiss Bond Congress
Week Ahead
- RBA interest rate decision
- Monthly CPI indicator
- U.S. GDP growth
*Data accurate as at 20.09.2024
Disclaimer: This document has been prepared by ABE Distribution Pty. Ltd ACN 673 177 912 Corporate Authorised Representative 1307088 (“ABE”) and is of a general nature only. It was prepared without considering your financial needs, circumstances and objectives. Before investing in a fixed-interest product with ABE, you should consider whether it is appropriate for your circumstances and review the relevant terms and conditions. This document contains links to other third-party websites, some of which require a subscription to read. Such links are for your convenience only, and ABE does not recommend or endorse these third-party sites.. No representation or warranty is made as to the accuracy, completeness or reliability of any estimates, opinions, conclusions, or other information contained in the content. The content may contain certain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors, many of which are beyond our control. To the maximum extent permitted by law ABE disclaims all liability and responsibility for any direct or indirect loss or damage that you may suffer as a result of relying on anything in this content. Past performance is not an indication of future performance