Australian Bond Exchange

8th November 2024 

Key points

  • Trump returns to the White House
  • RBA holds rates steady
  • Federal Reserve cuts interest rates again
  • Bank of England cuts rates
  • Australia balance of trade

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 the September quarter is 2.8%. 
The US cash rate (policy rate) is currently between 4.50%-4.75pa and the annual inflation rate in the year to September is 2.4%. 
The Bank of England Bank Rate currently sits at 4.75%pa to fight an inflation rate of 1.7% in the year to September. 
The European Central Bank Cash Rate (deposit facility) is 3.25%pa, to fight an annual inflation rate of 2% in the year to October. 

Trump Returns to the White House

Donald Trump’s return to the White House is still being digested by financial markets, but we’ve already seen Treasury yields spike with the U.S. 10-Year climbing to 4.33%pa (at the time of writing) as investors brace for potentially higher growth and inflation.

Equities have also risen following the election result, with anticipated tax cuts likely to boost corporate profits. This can be seen as a constructive development for many U.S. companies, including those linked to the Australian Bond Exchange’s fixed-income offerings.

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RBA Holds Rates Steady

The Reserve Bank of Australia (RBA) held the cash rate steady once again 4.35% p.a., pushing the central bank further towards the back of the rate-setting pack.  

The decision reflects the RBA’s caution amid ongoing inflation concerns which remains elevated and in the upper range of the 2-3% target band.  

Federal Reserve Cuts Interest Rates Again

The U.S. central bank reduced the federal funds rate by 0.25 percentage points this week, signalling a continued pivot from fighting inflation towards supporting economic stability and growth.

The decision closely follows Donald Trump’s stunning election victory, with Republicans likely to secure majorities in both Congress and the House of Representatives.

This will likely pave the way for many of Trump’s economic policies including tax cuts and tariffs, which are widely anticipated to be inflationary.

Bank of England Cuts Rates

The Bank of England cut interest rates on November 7, 2024, by 0.25 percentage points to 4.75% p.a.. This move marks its second cut this year, following a reduction in August.

Inflation in the UK has sharply decreased from its 2022 peak of 11% to under 2%. However, the Bank of England is expected to maintain a cautious approach in future rate adjustments, balancing inflation control with economic stability.

British rate setters will also undoubtedly be keeping an eye on the economic policies of the Trump administration which are expected to inflationary in nature and could have implications for monetary policy in the U.S. and abroad.

Week Ahead 

  • Australian consumer/business confidence
  • US inflation data
  • US retail sales data

*Data accurate as at 08.11.2024

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