The Oz headline was 'Lowe Blow: RBA unsure how high to go'
• The Reserve Bank governor Philip Lowe says there is no end in sight to interest rate rises!
• And he is “unsure” how much more pain mortgage holders will have to cop in order to tame “way too high” inflation.
• After 9 rises, the official cash rate at 3.35% and Lowe guesses we’re not at the peak.
• “How far we have to go up, I don’t know,” Dr Lowe told a Senate estimates hearing in Canberra. “It’s going to depend on the inflation data, the resilience of spending, the strength of the global economy, and what’s happening with prices and wages.”
• CBA CEO Matt Comyn thinks borrowers were only feeling about 50% of the impact of the rises so far and it will be 85% by year’s end.
• Why? Fixed rate loans and rate rises have a delayed effect on spending.
• Lowe says he won’t step down and I say rate rises aren’t his crime — he has to do it — but his “no rate rises until 2024” message will always be a black mark on his reign.
• Gotta hope inflation falls faster ASAP!
To Wall Street
According to CNBC: January retail sales rose 3%, while economists polled by Dow Jones anticipated a 1.9% increase. The number signals that the U.S. economy is holding up despite increased rate hikes by the Federal Reserve to tame inflation.
“The labor market’s resilience is the main reason consumers continue to spend and as long as that’s the case, inflation is likely to remain sticky,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in a Wednesday note. “The Fed is going to need to raise rates higher – and hold them higher for longer – than people currently expect and this is going to cause markets to go through some significant volatility as stock and bond markets are priced for benign scenarios and not the more difficult one that we are headed towards.”
And the strong jobs report recently and the hotter than expected inflation number added to this retail result has some saying this rally won’t last as Fed moves closer to 6% on interest rates!
It’s now at 4.5%-4.7% with its official rate of interest.
But Dan Niles, founder of the Satori Fund says the Federal Reserve could move interest rates closer to 6%. And he said that could be bad news for those hoping for a continued market rally.
“I think the Fed, quite honestly, is going to get higher to 6% before they stop raising,” Niles said on CNBC’s “Tech Check.”
Market observers and participants have disagreed on when the Fed will stop raising interest rates. Those predictions have helped drive positioning so far this year.
The reason why stocks are up after this retail report is that anyone who was expecting a US recession anytime soon has got it wrong!
The run of US economic data is stronger than expected which could spark inflation and rate rise concerns and this could easily lead to a share market sell-off. If that happens, I will be a buyer because I’m investing now to make money later in 2023 and 2024.