25th October 2024
Key points
- IMF warns on Aussie inflation
- Global growth outlook slashed
- China unveils raft of new stimulus measures
- Bank of Canada cuts again
- ABE monthly webinar – register now
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 August is 2.7%.
● The US cash rate (policy rate) is currently between 4.75%-5.0%pa and the annual inflation rate in the year to September is 2.4%.
● The Bank of England Bank Rate currently sits at 5.0%pa to fight an inflation rate of 2.2% in the year to August.
● The European Central Bank Cash Rate (deposit facility) is 3.5%pa, to fight an annual inflation rate of 1.8% in the year to September.
IMF Warns on Aussie Inflation
In a recent report, the IMF warned that Australia is expected to record the second-highest inflation reading out of 42 advanced economies over the course of next year.
With interest rates already falling in the U.S., Europe, New Zealand, and elsewhere, Australia is undoubtedly an outlier in this regard, however it’s important to recognise that the RBA hiked interest rates far less than its global peers in a bid to protect employment and the economy.
As Aussie and global bond yields rise, the disparity between bond returns and cash is only expected to widen further, creating a compelling reason for investors to review their portfolio allocations in these two asset classes.
Global Growth Outlook Slashed
The IMF cut its global growth forecast for next year, highlighting “growing risks” that could worsen the economic landscape, such as the ongoing conflict in the Middle East and protectionist measures disrupting global trade.
The bank downgraded projections for China, Japan, and the Euro Area however is more optimistic for growth in the U.S., Brazil, and the UK.
China Unveils Raft of New Stimulus Measures
China continues to be gripped by weak consumer demand and falling house prices which has prompted the Chinese government to unveil a raft of stimulus measures.
By some estimates, more than U.S. $1.67 trillion in new debt could be issued, the proceeds of which would go to supporting consumer sentiment, spending, and property prices.
Comments made by U.S. Treasury Secretary Janet Yellen stated that the stimulus was “utterly enormous”, but likely wouldn’t be enough to improve domestic demand.
As our largest trading partner, the economic situation in China is an important risk factor and is something we remain acutely attuned to.
Bank of Canada Cuts Again
The Canadian central bank has slashed its key policy rate again by 50 bps to 3.75%pa as inflation continues to ebb lower.
While recession seems unlikely in Canada, downside risks to the economy are mounting due to weak consumer spending.
ABE Monthly Webinar – Register Now
Join us for our next monthly webinar where we discuss the latest market and economic developments and their potential impacts on financial markets.
We will also be joined by special guest Wayne Strandquist from Australian Independent Retirees (AIR) who will discuss some of the great advocacy effort his organisation is doing for independently funded retirees.
Week Ahead
- Australian inflation – monthly
- U.S. core inflation – monthly
- US GDP growth
- US employment figures
- Bank of Japan interest rate decision
*Data accurate as at 25.10.2024
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