RBA Raises Rates Once Again, Heaping Pressure on Mortgages

RBA Raises Rates Once Again, Heaping Presure on Mortgages By Perry Cleveland-Peck

The Reserve Bank of Australia announced its 12th rise in interest rates in just over a year earlier today, further ratcheting up stress levels on an already massively burdened mortgage sector while warning that if inflation remains problematic, further increases are likely. The increase in the official cash rate by 25 basis points to 4.10% took it to its highest level since early 2012. The move followed warnings from RBA Gov. Philip Lowe last week that rising wages and the absence of productivity growth could trigger further increases. Australia's Fair Work Commission on Friday announced a 5.75% increase in the minimum wage, arguing that it wouldn't add to inflation. Still, bets in money markets on further interest-rate increases jumped after the announcement.

Read on for more of today's news.

Top News RBA Announces Further Rate Increase, Sees More on Horizon

The Reserve Bank of Australia raised interest rates once again earlier today, a move that will be viewed widely as an implicit rejection of the federal government's annual budget announced a month ago, which many economists argued would add to inflation because of generous cost-of-living offsets paid directly to households.

"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve," RBA Gov. Philip Lowe said in a statement announcing the rate decision.

Glynn's Take: RBA's Anxiety About Wage Growth Drives Rate Hike By James Glynn

A fundamental breakdown between the aims of wage policy and monetary policy in Australia is now threatening to drive interest rates up more than most economists are forecasting, and there seems to be little government will to correct the situation. Read more .

U.S. Economy West Coast States Face Higher Unemployment, Falling Wages.

Janitors and teachers, and restaurants and dry cleaners in California, Oregon and Washington are feeling the cooling effects of tens of thousands of tech layoffs and other cost-cutting measures since the middle of last year.

Dockworkers Extend Job Actions Delaying West Coast Port Cargoes

Unionized dockworkers throttled cargo operations at several West Coast ports, extending job actions snarling imports at some of the biggest U.S. trade gateways and prompting retailers to ask the White House to intercede.

Key Developments Around the World Saudi Output Cut to Boost Oil Prices Could Be Costly

Saudi Arabia's output cut to 9 million barrels a day, a level that is the lowest since June 2021 and rarely seen in the past 10 years, suggests Riyadh is willing to sacrifice market share to prop up prices.

Enforcers of China's One-Child Policy Cajole People to Have Three

Using coercion and fines, China was adept at preventing couples from having children during the decades of its one-child policy. It has been less successful in fostering a " birth-friendly society ."

RBA Announces Further Rate Increase, Sees More on Horizon

The Reserve Bank of Australia announced a further increase in the official cash rate to 4.10% from 3.85%, and warned that further increases are likely. The rate rise was driven by growing anxiety that inflation pressures are again on the rise.

Financial Regulation Roundup SEC Says Binance Ran Illegal Crypto Exchange in U.S.

The Securities and Exchange Commission on Monday sued Binance, the world's largest cryptocurrency exchange, alleging the overseas company operated an illegal trading platform in the U.S. and misused customers' funds.

Progrexion Files for Bankruptcy Over $2.7 Billion CFPB Claim

Credit repair services provider Progrexion, owner of https://urldefense.com/v3/__http://Credit.com__;!!F0Stn7g!DbUcq0ATxZWB-xnX9W7Tdra5tuHMrzMcw_8FB1i1RzWIgquFfj4Cd_Vw8G863gQnKAewc-5z_7abG5f6FdmgQ8r2xfv6ud7ye3k5p-kt$ and https://urldefense.com/v3/__http://Creditrepair.com__;!!F0Stn7g!DbUcq0ATxZWB-xnX9W7Tdra5tuHMrzMcw_8FB1i1RzWIgquFfj4Cd_Vw8G863gQnKAewc-5z_7abG5f6FdmgQ8r2xfv6ud7ye72t9HJf$ , filed for bankruptcy after losing a court decision to dodge $2.7 billion in payments requested by the Consumer Financial Protection Bureau.

Forward Guidance Wednesday (all times ET)

4:50 a.m.: Speech by ECB's de Guindos at financial integration conference of European Commission and ECB

8:30 a.m.: Canada trade report for April; U.S. trade report for April

10 a.m.: Bank of Canada interest-rate decision

Thursday

8:30 a.m.: U.S. weekly jobless claims

3:25 p.m.: Speech by Bank of Canada's Beaudry to Greater Victoria Chamber of Commerce

Research U.K. Needs Higher Interest Rates to Curb Wage Growth

The recent decline in the number of job vacancies in the U.K. suggests upward pressure on wage growth from labor shortages is probably past its peak, Ashley Webb, economist at Capital Economics, writes in a note. However, a further fall in job vacancies is necessary for wage growth to slow from the current rate of 5.8%-on a three-month rolling basis-to rates of 3.0%-3.5% consistent with the Bank of England's 2% inflation target, he writes. That could be triggered by a big rise in the supply of workers, but it is more likely to require weaker demand for labor, Webb adds. That is why the central bank will need to raise interest rates further, from 4.5% currently to a peak of 5.25%, he says.

-Edward Frankl

Basis Points The Conference Board's Employment Trends Index fell from an upwardly revised 116.79 in April to 116.15 in May, the private-research group said Monday, suggesting job gains in the U.S. will continue but at a slower pace than in recent months. (Dow Jones Newswires) Activity in the U.S. services sector in May expanded below economists' expectations, as the Institute for Supply Management said its services activity index fell from 51.9 in April to 50.3. Economists polled by The Wall Street Journal expected the index to rise to 52.3. (DJN) China's fiscal situation is healthy and secure, leaving ample room for addressing risks and challenges, the country's finance ministry said in response to recent concerns over potential government debt crises in some Chinese provinces. (DJN) Feedback Loop

This newsletter is compiled by Perry Cleveland-Peck in Barcelona and James Christie in San Francisco.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

June 06, 2023 07:30 ET (11:30 GMT)

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