In Bendigo Bank’s latest Economic Update, our Chief Economist David Robertson outlines:
- As inflation stabilises, cash rate cuts to pause in September
- US central bank likely to cut as jobs growth weakens - despite inflationary risks ahead
- Gold rush: The relentless march higher in the price of gold amid global uncertainty
Cash rate to hold in September
Higher inflation and resilient GDP has confirmed little chance of a September cash rate cut.
“After the August RBA cash rate cut, we’re not expecting a back-to-back cut in September - especially after a higher read for inflation in the latest monthly indicator for July,” Mr Robertson said.
All eyes will now be on the quarterly inflation data - released late next month - to see just how long homeowners will need to wait until they can breathe another sigh of relief.
“The Reserve Bank wouldn’t have been surprised by the rise in CPI in the monthly numbers due to electricity rebates and other one-off factors, but core inflation was a little higher so the RBA will want to see the full third quarter data out on October 29 before cutting again,” Mr Robertson said.
“Our next RBA rate cut is still forecast in November, but we are getting closer to the low in the easing cycle, so jobs data and export demand will be important in this timing, and whether the RBA need to keep cutting rates next year.”
US central bank rate cut imminent, while pace eases elsewhere
“The pace of central bank cuts elsewhere has eased as rates get closer to ‘neutral’,” Mr Robertson said.
“However the US Federal Reserve is now expected to cut rates later this month after weaker jobs data and after Federal Chair Jerome Powell gave his clearest message yet that a cut is imminent, despite inflation trending higher.”
Stronger than expected GDP as disposable income grows
The latest GDP numbers were stronger than forecast with Q2 growth of 0.6% and annual growth of 1.8%: “The data showed a healthy dose of household consumption, supported by the rebound in disposable income responding to RBA cuts and less of a drag from inflation, which aligns to our view that the private sector will increasingly take the reigns from public spending.”
Mr Robertson said broad policy reform remains urgent given productivity growth is down 0.4% year-on-year, despite a modest rebound in Q2.
Record breaking gold rush continues
“Global policy uncertainty remains a key theme as the size and full extent of tariffs continues to ebb and flow, so defensive assets such as gold have maintained their extraordinary rally making fresh record highs in US and Australian dollar terms,” Mr Robertson said.
“This bull market won’t last forever, but investors have continued to diversify away from the US dollar, and gold has recently jumped to Australia’s third largest commodity export.”
