RBA Denies Accusations of Late Rate Cut
The Reserve Bank of Australia (RBA) has dismissed criticism that it was too slow in cutting interest rates, risking a sudden rise in unemployment.
The surge in unemployment in June did not surprise the central bank, RBA Governor Michele Bullock said in a speech to financial market participants on Thursday.
The rise in the unemployment rate to 4.3% in June—the highest since November 2021—was expected by the central bank in May, she said.
"Our overall assessment at the time of our updated forecasts in May was that there was still some tightening in the labor market, and we expected that tightening to ease somewhat over the remainder of the year," Bullock said.
"A range of indicators support this assessment, and in many respects not much has changed," she added.
The comments come amid growing pressure on the RBA to cut interest rates as inflation has returned to its 2% to 3% target range, economic growth remains weak, and unemployment is rising. The RBA drew sharp criticism earlier this month when it kept interest rates unchanged despite market bets of a near-certain rate cut. The RBA stated it would review second-quarter inflation data next week before considering further cuts.
Bullock said some labor market constraints remain.
"Firms continue to report significant difficulties in finding workers, although these constraints have eased somewhat recently," the RBA chief said.
Unit labor costs have also risen sharply, he added.
Importantly, Bullock acknowledged that recent quarterly underlying inflation has been approaching a pace consistent with the midpoint of the annual target range.utioned that this support could be temporary, and global growth remains at risk of being depressed. Market attention is also focused on Thursday's crucial meeting between Chinese President Xi Jinping and European Union representatives, the first such summit since 2023.
On the supply side, data shows that US national crude oil inventories fell by 3.2 million barrels in the past week. However, stocks at the Cushing storage hub—the main delivery point for the WTI contract—actually rose for the third consecutive week. Diesel fuel inventories increased, but remained at their lowest seasonal level since 1996, indicating a still-tight fuel market amid the summer heat.
Global supply factors are also in the spotlight. OPEC+ production is expected to increase along with increased production quotas, potentially flooding the market. Meanwhile, the European Union's latest sanctions against Russia add to uncertainty, especially for importing countries like India. US Treasury Secretary Scott Bessent said that China's purchases of Russian and Iranian oil are likely to be on the agenda for trade negotiations between the two countries next week.
Source: Newsmaker.id
