The Reserve Bank of Australia (RBA) announced its decision to keep interest rates on hold as economists had expected. As the US and Canadian markets were closed on Monday due to the Labor Day bank holiday, market participants focused on China’s Caixin/S&P Global August services activity figures that slowed down amid sluggish demand.
 

RBA Interest Rate Decision

Earlier in the morning the RBA kept interest rates unchanged for the third time in a row. The RBA’s board post-meeting announcement said that “the Board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook. Inflation in Australia has passed its peak and the monthly CPI indicator for July showed a further decline. But inflation is still too high and will remain so for some time yet. The central forecast is for CPI inflation to continue to decline and to be back within the 2–3 percent target range in late 2025.”

Commenting on the RBA’s rate decision, ANZ Bank analysts suggested that “overall, we see nothing in today’s decision or statement to push us off our view that the RBA is on an extended pause as it examines how the 400bp of monetary tightening to date washes through the economy.”

It should be noted that the RBA’s Governor, Philip Lowe, is set to be replaced by his deputy, Michele Bullock, on September 18th.
 

Eurozone Retail Sales July Report

On Wednesday morning, Eurostat will publish its July retail sales report for the eurozone. Market analysts suggest that retail sales in the euro bloc shrank by 1.2% in the summer’s second month, continuing their downward trajectory.

On a monthly basis, they expect a 0.2% drop, resuming the downward spiral that has made economists wonder how much-rising interest rates and elevated inflation have hurt the market.
 

Blackrock Analysts Suggest Fed Is Done With Rate Hikes

Blackrock’s chief investment officer Rick Rieder said that “the Fed should be done. You can put your shoulder behind a bit more of interest-rate exposure than has been the case certainly over the last few months.”

Commenting on the US NFP report, Rieder mentioned that “26 million jobs ..." (created in the US over the past 3 years or so) " is like adding an economy the size of Australia or Taiwan (including every man, woman, and child)” and added that he expects wage pressure to ease.
 

Moody’s Downgrades China’s Economic Growth Forecast

It’s no secret that some economists believe China’s economic growth is under question as the government’s financial measures to stimulate the economy seem to underperform. Analysts at Moody’s downgraded their 2024 GDP forecast for China but kept the 2023 one unchanged.

The Moody’s report noted that “China is facing ‘considerable growth challenges’ stemming from weak business and consumer confidence amid economic and policy uncertainty, continued property sector woes, and an aging working population. We believe that low consumer confidence is holding back household spending, and economic and policy uncertainty will continue to weigh on business decisions.”

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