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Further jump in inflation to prompt June rate hike

We now expect the RBA to start hiking in June in response to stubbornly high inflation. And while high household debt is a concern, the extreme tightness of the labour market coupled with continued loose fiscal policy means that rates may rise faster than most anticipate.
Marcel Thieliant Senior Japan, Australia & New Zealand Economist
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Australia & New Zealand Economics Weekly

Housing downturn to weigh on activity

The housing downturn is now in full swing. While that hasn’t prevented a solid rise in consumption in Q2, we think falling wealth will be a drag on consumer spending next year. What’s more, our forecast that house prices will eventually fall 15% from their April peak would be consistent with dwelling investment falling sharply in the coming years. The upshot is that the housing downturn will bring the Australian economy close to recession next year.

1 July 2022

Australia & New Zealand Data Response

Australia CoreLogic House Prices (Jun.)

The monthly decline in house prices in June was the largest since 2019 but is unlikely to be the sharpest decline in the current downturn. We think house prices will eventually fall by 15% from their April peak, which will weigh heavily on GDP growth next year.

1 July 2022

Australia & New Zealand Data Response

Australia Retail Sales (May 2022)

The strong rise in retail sales in May highlights the strength in the Australian economy and is consistent with our view that the RBA will continue to hike rates aggressively in the months ahead.

29 June 2022

More from Marcel Thieliant

Australia & New Zealand Data Response

Australia Wage Price Index (Q4)

The Q4 wage data won’t alter the RBA’s view that inflation isn’t sustainably within its 2-3% target band yet, but we still expect the Bank to start hiking in June as inflation surprises to the upside.

23 February 2022

Japan Economics Update

What would a 5-year yield target mean for Japan?

If the Bank of Japan shortened the duration of its yield target, the impact on economic activity and inflation would probably be small but it could improve the long-term health of insurers and pension funds. It’s not clear though what could prompt such a policy shift and we expect the Bank to stick to its 10-year target for the foreseeable future.

22 February 2022

Japan Economics Weekly

Vaccine boost, surging manufacturing profits

Services spending finally showed signs of life last quarter, underlining that the vaccine boost is finally filtering through. Another reason to be confident about the outlook is that consumer price inflation remains subdued while capital goods prices are rising the most in decades. That means that households’ purchasing power isn’t being eroded by soaring living costs as in many other advanced economies, while the profit margins of Japanese manufacturers have reached record highs despite soaring input costs.

18 February 2022
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