Australia leaves rates on hold at 3.25%
Australia leaves rates on hold at 3.25%
The Reserve Bank of Australia last month sliced 25 basis points off the cash rate, taking it to lows not seen since October 2009 when it first resumed hiking rates following the global downturn.
Economists had widely tipped a further 25 basis point cut, but central bank Gov. Glenn Stevens said the RBA "judged that the stance of monetary policy was appropriate for the time being".
Stevens said while commodity prices were lower and employment was softening, growth has been running close to trend over the past year in mining-powered Australia and inflation was in the RBA's preferred 2-3 percent zone.
"Looking ahead, the peak in resource investment is likely to occur next year, at a lower level than expected six months ago," he said.
"As this peak approaches, the board will be monitoring the strength of other components of demand."
The Aussie dollar rose above 104 US cents on the decision, while the share market closed up 0.24 percent at 4,484.8 points.
Stevens said global growth was forecast to be a little below average for a time, and risks to the outlook were on the downside, largely as a result of euro zone woes. But he said risks elsewhere "seem more balanced".
"The United States is recording moderate growth, while recent data from China suggest growth there has stabilized," he said.
Australia was one of the first developed economies to begin raising rates after the global financial crisis rattled markets worldwide, first lifting them in October 2009.
It began pulling back again in November 2011 when the central bank slashed the cash rate for the first time in more than two years to bring it down to 4.50 percent. The rate has been declining ever since.
Finance Minister Penny Wong said Australia stood out against its peers when it came to a strong economy, and mortgage-holders had benefited from a total cut of 150 basis points in the past year.
"We've got solid growth, low unemployment and low interest rates," she said.
The decision to keep rates on hold, which breaks a six-year trend of changing the cash rate on the same day as the nation's most famous horse race, the Melbourne Cup, was questioned by retailers.
"We believe there is still time for the RBA to deliver a Christmas gift to business owners, workers and consumers, by cutting rates in December," National Retail Association Chief Executive Trevor Evans said.
But Stevens said the impact of earlier decisions were still filtering into the economy and the RBA would be monitoring the situation carefully.
"Interest rates for borrowers have declined to be clearly below their medium-term averages and savers are facing increased incentives to look for assets with higher returns," he said in his statement.
"Further effects of actions already taken to ease monetary policy can be expected over time."
Oil prices gain on lower US crude inventories, Libyan output disruption
SINGAPORE: Oil prices recovered some day-earlier losses in Asia on Wednesday, supported by a drop in US commercial crude inventories and the loss of storage capacity in oil producer Libya.
US crude inventories fell by 3 million barrels to 430.6 million barrels in the week to June 15, according to American Petroleum Institute (API) in a weekly report on Tuesday.
Brent crude futures rose 18 cents, or 0.2 percent, to $75.26 per barrel at 0351 GMT, compared with their last close on Tuesday.
US West Texas Intermediate (WTI) crude futures gained 20 cents, or 0.3 percent, to $65.27.
Traders said a drop in Libyan supplies due to the collapse of an estimated 400,000-barrel storage tank also helped push up prices.
Looming larger over markets, however, is a June 22 meeting in Vienna of the Organization of the Petroleum Exporting Countries (OPEC) with some other producers, including Russia, to discuss supply.
De-facto OPEC leader and top crude exporter Saudi Arabia, as well as Russia, which is not a member of the cartel but is the world’s biggest oil producer, are pushing to loosen supply controls introduced in 2017 to prop up prices.
Other OPEC-members, including Iran, are against such a move, fearing a sharp slump in prices.
“Saudi Arabia and Russia continued to push for a relaxation in production constraints, going against many other members’ wishes,” ANZ bank said on Wednesday.
“Iran rejected a potential compromise, saying it won’t support even a small increase in oil production. This puts Saudi Arabia in a tough position, as unanimity is needed for any accord to be reached,” it added.
Jack Allardyce, oil-and-gas research analyst at Cantor Fitzgerald Europe, said he had the “expectation that supply quotas will be increased, but probably more in line with the smaller range being quoted (300,000-600,000 barrels per day) given the lack of consensus among OPEC members.”
Allardyce said “we could see this knocking $5 per barrel off Brent and perhaps squeezing the WTI discount a little.”
Markets are also anxiously watching trade tensions between the United States and China, in which both sides have threatened to impose stiff duties on each other’s exports, including US crude oil.
A 25 percent tariff on US crude oil imports, as threatened by China in retaliation for duties Washington has announced but not yet implemented against Chinese products, would make American crude uncompetitive in China versus other supplies.
This would almost certainly lead to a sharp drop-off in Chinese purchases of US crude, which have boomed in the last two years to a business now worth around $1 billion per month.