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Hedge Clippings | 09 August 2024 The result of this week's RBA board meeting came as no surprise given the CPI number from the week before, and the board's previous insistence that they were - or are still - "resolute in their determination" to curb sticky inflation which is stubbornly close to 4% whichever number you look at. As the RBA's statement's headline noted, "Inflation remains above target and is proving persistent," and a trimmed mean figure of 3.9% is way off the board's target of 2.5%. Not only way off numerically, but way off in the future as well, with the RBA's forecast that it will be December 2026 before the target will be met. In addition, the statement added another headline that "The outlook remains highly uncertain," which had the market's soothsayers basically writing off any chance of a rate cut this year. However, it could have been worse - the board gave strong consideration at their meeting to raising rates, which would have upset home owners with a mortgage, as well as the treasurer Jim Chalmers. Why so? The RBA indicated that the government wasn't helping, with tax cuts, support for wage rises, and energy support all contributing to the problem. But the Treasurer was quick to refute that - as he would. However, simple logic and facts tell you that while the RBA is trying to curb consumption, the government, with an election not too far away, are tipping money into consumers' pockets as fast as they can. It seems to us that the RBA and the government are pulling on different ends of the same rope. When Chalmers announced the appointment of Michele Bullock as the new RBA Governor last year, it was all smiles, generally at the expense of departing Governor Philip Lowe. Less than 12 months into her tenure, and there may be some gritted teeth behind his smile, but if he really expected any change in her approach he must have been deluding himself. Bullock has been at the RBA since 1985 and was deputy governor since 2022 under Lowe. At the time of her appointment Albo was quoted as saying "Ms. Bullock is eminently qualified to lead this national institution," although he was also quick to claim credit this week for getting inflation under control - sort of. On the radio interview we heard Albo was quick to change the subject away from inflation, moving to safer ground, namely Australia's medal tally at the Paris Olympics. In particular he was quite excited about Aussie success in the skateboarding and break-dancing, obviously pitching for younger voters in the upcoming election. Before that occurs (maybe even later this year) we're sure he'll be basking in reflected Olympic glory, either at the potential ticker tape parade through the streets or the inevitable reception at the Lodge on the athletes' return. News & Insights New Funds on FundMonitors.com The RBA's August decision: Insights from Nick Chaplin of Seed Funds Management | Seed Funds Management Market Update | Australian Secure Capital Fund Market Commentary | Glenmore Asset Management |
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