ABE Weekly Newsletter
Friday 10 February 2023
Key Points
- Over the 12 months to December 2022, the CPI rose 7.8 per cent (AUS)
- The RBA raised its cash rate by 25 basis points to 3.35 per cent in its first board meeting of 2023 (AUS)
- Global inflation remains very high, yet it is slowing down because of lower energy prices, less supply-chain problems, and tighter monetary policy (Global)
- The Fed funds interest rate stands at 4.58 per cent as of 06 February 2023 (US)
- The CPI for all items increased 6.5 per cent over the last 12 months (US)
- The ECB rate stands at 3 per cent; Inflation in the Euro area was 9.2 per cent (Euro)
- The BOE raised interest rate to 4 per cent, inflation is 10 per cent (Euro).
Australia
In the December quarter of 2022, the “Consumer Price Index” (CPI) in Australia increased 1.9 per cent according to the “Australian Bureau of Statistics” (ABS). The ABS also reported that over the 12 months to December 2022, the CPI rose 7.8 per cent. The most significant price increases were in domestic holiday travel and accommodation (+13.3 per cent), Electricity (+8.6 per cent), International holiday travel and accommodation (+7.6 per cent), and new dwelling purchase by owner-occupiers (+1.7 per cent).
The “Reserve Bank of Australia” (RBA) raised its cash rate by 25 basis points to 3.35 per cent in its first board meeting of 2023. The RBA has increased the cash rate in nine consecutive meetings to control inflation, which increased at an annual pace of 7.8 per cent in the December quarter. The RBA Governor, Philip Lowe, indicated that further increases in interest rates could be necessary to return inflation to the target rate of 2-3 per cent over time. We believe mortgage holders will likely feel the impact of these rate increases in their pockets as mortgage repayments rise, thereby likely reducing their disposable income.
Global Markets
According to Philip Lowe, global inflation remains very high, yet it is slowing down because of lower energy prices, less supply-chain problems, and tighter monetary policy.
United States (US)
The “Federal Reserve” (Fed) funds interest rate stands at 4.58 per cent as of 6 February 2023.
Jerome Powell, the Federal Reserve Chair, has stated that more interest rate hikes are needed to reduce inflation and slow down the rapidly growing U.S. job market. He noted that the U.S. labour market is “extraordinarily strong” and that the process of lowering inflation has just begun, with more evidence needed to be sure it is heading in the right direction. The recent employment report showed 517,000 new jobs in January, which was higher than expected, leading analysts to predict that interest rates will rise above 5 per cent to ease wage pressure in the labour market. However, Powell emphasized that the Fed would react to the data and that if more reports show a strong labour market or higher inflation, they may need to raise rates further.
The “Consumer Price Index” (CPI) for all items fell 0.1 per cent in December, it increased to 6.5 per cent over the last 12 months. Based on job strength, the battle against inflation will “take a bit of time” Jerome Powell said.
European Union
The “European Central Bank” (ECB) main refinancing operations rate (the interest rate banks pay when they borrow money from the ECB for one week) stands at 3 per cent as of 8 February 2023. Inflation (measured by the Harmonised Index of Consumer Prices or HICP) in the Euro area was 9.2 per cent for the Euro area, the lowest being 5.5 per cent for Spain and the highest being 20.7 per cent for Latvia.
Great Britain
On 2 February 2023, the “Bank of England” (BOE) raised interest rates by 0.5 per cent to 4 per cent. The BOE explained that interest rates increased because inflation is too high, around 10 per cent while the target is 2 per cent.
Disclaimer: The information and any advice provided in the ABE Weekly newsletter has been prepared without considering your objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things. You should obtain the relevant appropriate document for any product mentioned and consider its contents before making any decision.