The Reserve Bank of Australia (RBA) yesterday boosted its benchmark interest rate for a fourth consecutive month to a six-year high of 1.85 percent.
The Australian central bank’s decision was the cash rate’s third consecutive hike of half a percentage point.
When the bank lifted the rate by a quarter percentage point at its monthly board meeting in May, it was the first rate hike in more than 11 years.
Photo: AFP
The cash rate is now at its highest point since May 2016, when the bank cut the rate to 1.75 percent from 2 percent.
RBA Governor Philip Lowe said his board “places a high priority on the return of inflation” to a target range of 2 to 3 percent “over time, while keeping the economy on an even keel.”
“The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments,” Lowe said in a statement.
Yesterday’s hike was widely anticipated after official data released last week showed inflation in the year through June was 6.1 percent, up from 5.1 percent in the year through March.
Inflation only increased by 3.5 percent during the last calendar year.
Treasurer of Australia Jim Chalmers said the latest rate rise would create more financial hardship for families who are already contending with higher grocery and power prices.
“This decision doesn’t come as a surprise. It’s not a shock to anybody, but it will still sting,” Chalmers told Parliament.
Lowe is under mounting criticism over his forecast in November last year that the cash rate would remain at a record low 0.1 percent until 2024, despite COVID-19 pandemic-induced inflation.
Warren Hogan, a former economic adviser to a previous Australian government and chief economist at Australia and New Zealand Banking Group Ltd and Credit Suisse Group AG, said Lowe had misled borrowers into taking on more debt than they should have.
Overextended first-home buyers were “staring down the barrel of the most significant tightening of monetary policy in the modern era,” Hogan told Australian Broadcasting Corp.
“I can’t see how much bigger an error a central bank and its board can make and it’s all about the credibility of the institution,” Hogan said, referring to the forecast of continuing low interest rates.
The government last month announced a wide-ranging review of the bank and monetary policy.
Australian home prices were falling at the fastest pace since the global financial crisis in 2008 and market conditions were “likely to worsen” as interest rates continue to rise, adding to costs for home buyers, property analytics firm CoreLogic Inc reported on Monday.
Japanese technology giant Softbank Group Corp said Tuesday it has sold its stake in Nvidia Corp, raising US$5.8 billion to pour into other investments. It also reported its profit nearly tripled in the first half of this fiscal year from a year earlier. Tokyo-based Softbank said it sold the stake in Silicon Vally-based Nvidia last month, a move that reflects its shift in focus to OpenAI, owner of the artificial intelligence (AI) chatbot ChatGPT. Softbank reported its profit in the April-to-September period soared to about 2.5 trillion yen (about US$13 billion). Its sales for the six month period rose 7.7 percent year-on-year
CRESTING WAVE: Companies are still buying in, but the shivers in the market could be the first signs that the AI wave has peaked and the collapse is upon the world Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported a new monthly record of NT$367.47 billion (US$11.85 billion) in consolidated sales for last month thanks to global demand for artificial intelligence (AI) applications. Last month’s figure represented 16.9 percent annual growth, the slowest pace since February last year. On a monthly basis, sales rose 11 percent. Cumulative sales in the first 10 months of the year grew 33.8 percent year-on-year to NT$3.13 trillion, a record for the same period in the company’s history. However, the slowing growth in monthly sales last month highlights uncertainty over the sustainability of the AI boom even as
AI BOOST: Next year, the cloud and networking product business is expected to remain a key revenue pillar for the company, Hon Hai chairman Young Liu said Manufacturing giant Hon Hai Precision Industry Co (鴻海精密) yesterday posted its best third-quarter profit in the company’s history, backed by strong demand for artificial intelligence (AI) servers. Net profit expanded 17 percent annually to NT$57.67 billion (US$1.86 billion) from NT$44.36 billion, the company said. On a quarterly basis, net profit soared 30 percent from NT$44.36 billion, it said. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said earnings per share expanded to NT$4.15 from NT$3.55 a year earlier and NT$3.19 in the second quarter. Gross margin improved to 6.35 percent,
FAULTs BELOW: Asia is particularly susceptible to anything unfortunate happening to the AI industry, with tech companies hugely responsible for its market strength The sudden slump in Asia’s technology shares last week has jolted investors, serving as a stark reminder that the world-beating rally in artificial intelligence (AI) and semiconductor stocks might be nearing a short-term crest. The region’s sharpest decline since April — triggered by a tech-led sell-off on Wall Street — has refocused attention on cracks beneath the surface: the rally’s narrow breadth, heavy reliance on retail traders, and growing uncertainty around the timing of US Federal Reserve interest-rate cuts. Last week’s “sell-off is a reminder that Asia’s market structure is just more vulnerable,” Saxo Markets chief investment strategist Charu Chanana said in
RSS