Australian Bond Exchange Weekly Newsletter
Friday 6 January 2023
Key Points
- Expectations of interest rate rising (Aus)
- Housing will remain a strong sector driven by higher migration levels (Aus)
- CPI stands at 6.9 per cent as of October 2022 (Aus)
- Federal Funds interest rate stands at 4.33 per cent. (US)
- It is expected interest rates in Europe will peak in June-August 2023
Australia
For the past several months, the cash rate has increased consistently, and it now stands at 3.10 per cent after a 0.25 per cent increase on 07 December 2022. We expect that the interest rate will continue rising. This means that households will continue to feel the pressure of living costs.
One of the main concerns for Australians are house prices, as it makes up about 60% of investors’ portfolios. If property prices go down, so does wealth. Australian property values decreased 5.3% in 2022, however it is expected that housing in Australia will remain a strong sector driven by higher migration levels.
In terms of inflation, according to the Australian Bureau of Statistics (ABS), the latest monthly Consumer Price Index (CPI) data indicates that the CPI rose 6.9 per cent in the year to October 2022. The increase in the CPI was driven by a rise in housing, automotive fuel and fruit and vegetables prices which increased 20.4 percent, 11.8 per cent and 9.4 per cent respectively. If inflation keeps increasing, the RBA has mentioned there will be more interest rate increases.
United States
The Federal Funds interest rate stands at 4.33 per cent as of 4 January 2023. According to the Federal Reserve, there needs to be more evidence of inflation decreasing before the FED lowers rates again. However, inflation does not seem to be slowing down yet.
EU
According to Villeroy, French European Central Bank (ECB) policymaker, interest rates are expected to peak by the European summer.
Contact us if you have any questions or would like any assistance.
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