Will the Reserve Bank wait for the US Fed to cut interest rates first?

MotleyFool04-23

While the US economy is seen as a leading indicator for the world, the US Fed is unlikely to be the first major central bank to start cutting interest rates, says AMP deputy chief economist Diana ...

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Commonwealth Bank of Australia Ltd  shares spiralled 5.08% and National Australia Bank Ltd  shares fell 3.67%.This may impact the global economy, and possibly influence other central banks on the timing of","collect":0,"end_time":0,"defaultTopTitle":"fool.com.au","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK7511":"ESG概念","RBA":"里奇兄弟拍卖","XAO.AU":"标普/澳交所 普通股指数","BK4137":"综合支持服务","LU1815336091.USD":"THREADNEEDLE (LUX) GLOBAL SMALLER COMPANIES \"AUP\" (USD) INC","XJO.AU":"标普/澳交所 200指数","CBA.AU":"COMMONWEALTH BANK OF AUSTRAL","BK7135":"综合性银行","LU1303367103.USD":"摩根大通多经理另类基金 A (acc)","XKO.AU":"标普/澳交所 300指数","NAB.AU":"NATIONAL AUSTRALIA BANK LTD","LU0757428866.USD":"THREADNEEDLE (LUX) GLOBAL SMALLER COMPANIES \"AE\" (USD) ACC","LU2098885051.SGD":"JPMorgan Funds - Multi-Manager Alternatives A (acc) SGD"},"translate_title":"储备银行会等待美国联邦储备银行先降息吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CBA.AU":1,"NAB.AU":1,"RBA":1,"XJO.AU":1,"XAO.AU":0.9,"XKO.AU":0.9},"content_text":"While the US economy is seen as a leading indicator for the world, the US Fed is unlikely to be the first major central bank to start cutting interest rates, says AMP deputy chief economist Diana Mousina. \nMousina points out that the US was not the first nation to increase interest rates as inflation grew in 2022, and regardless, domestic growth conditions are the main element in any central bank's decision on rates.\nHere's what's happening. \nWhere are we up to with inflation? \nMarkets were rattled this month after the US reported a third consecutive month of hotter-than-expected inflation.\nOn the day of the news, the S&P 500 Index (SP: .INX) closed down 1% and the Nasdaq Composite Index (NASDAQ: .IXIC) lost 0.8%. \nThe S&P/ASX 200 Index (ASX: XJO) fell 0.44% the following day and a further 2.57% over the next three trading days. \nMajor bank stocks also took a dive over this four-day period. Commonwealth Bank of Australia Ltd (ASX: CBA) shares spiralled 5.08% and National Australia Bank Ltd (ASX: NAB) shares fell 3.67%. \nMarkets did not like this news because sticky inflation will likely delay the US Fed's first interest rate cut. \nThis may impact the global economy, and possibly influence other central banks on the timing of their own cuts. \nThere were also concerns that stalled progress on reducing inflation in the US may mean the same would occur here. Mousina says this is unlikely, but it only takes a little uncertainty to move stock markets. \nShe said:\n\nExpectations for US interest rates have an important bearing on financial market pricing for interest rates, which influences bond yields and equities.\n\nThe next round of quarterly inflation figures for Australia are due out tomorrow. \nCBA senior economist Belinda Allen says the bank expects inflation to have fallen from 4.1% per annum in the December quarter to 3.4% per annum in the March quarter. \nWhy is US inflation sticky? \nOne reason is that US mortgage holders have not been impacted by rising interest rates as much as those in Australia. This means their spending has not been curtailed to the same extent. \nThe US is expected to book 2.7% gross domestic product growth in 2024. This compares to 1.5% in Australia, according to the International Monetary Fund.\nMousina explained: \n\nAustralia has had the largest increase in outstanding mortgage rates despite having the lowest increase in interest rates compared to its peers. \nIn contrast, US outstanding mortgage rates have barely risen, despite having one of the largest increases in rates across the major central banks.\n\nThe IMF also notes that US fiscal policy is supporting economic growth. The biggest example of this is the Inflation Reduction Act which will pump US$369 billion into the economy for clean energy investments. \nWhen will major Western nations start cutting interest rates? \nMousina said the US Fed is likely to delay rate cuts until the second half of the year. \nAs for the rest of the world, the Bank of Canada and the European Central Bank are likely to cut interest rates in June. \nCanada and the Eurozone have seen some of the largest increases in unemployment among Western nations at 6.1% and 6.5%, respectively. \nAlong with New Zealand, they have experienced the biggest slowdown in economic growth due to higher interest rates. \nMousina said: \n\nNew Zealand GDP growth was negative in the second half of 2023 (a technical recession). \nCanada narrowly avoided a technical recession in the second half of 2023, but growth is low at under 1% per annum. \n… Eurozone growth has been basically flat over 2022-23 from the impacts of high energy prices. \n\nThe Reserve Bank of New Zealand is likely to wait until July or August once inflation has lowered further.\n\nInflation has come down considerably in Canada and the Euro area, with headline consumer prices just above the 2% inflation target. \nServices inflation in New Zealand is still high, despite the slowing in economic growth.\n\nWhen will the RBA cut interest rates in Australia?\nAs for Australia, Mousina said: \n\n… we have been expecting the Reserve Bank of Australia (RBA) to start cutting rates in June but the risk is a later start to cuts (like in August) as the RBA appears reluctant to cut interest rates before further confirmation of a slowing in inflation.\n\nCBA is tipping the Reserve Bank will cut interest rates in September while ANZ is forecasting November.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429346611"}