RBA minutes show RBA eyeing 40 basis point hike in May
Minutes of the Reserve Bank of Australia’s monetary policy meeting in May
Minutes of the Reserve Bank of Australia’s monetary policy meeting in May
Headlines via Reuters, the audacity is mine:
The Australian economy was supported by household and corporate balance sheets
the resilience of the Australian economy has been particularly evident in the labor market
members considered three options
Choice
Options represent a contract that allows investors to buy or sell underlying instruments such as securities, exchange-traded funds (ETFs) or indices at a certain price over a certain period of time. Buying and selling options can be done in the options market, which trades security-based contracts. When trading options, the option price is therefore a percentage of the underlying asset or security. Investors who buy an option can buy shares later and are known as a call option, while buying an option that allows you to sell shares later is called a put option. Why Trade Options In particular, options differ from stock trading in that they do not represent ownership of a company. In addition, futures contracts use contracts in the same way as options, although options are considered much lower risk due to the fact that you can withdraw or close an options contract at any time. When buying or selling options, traders retain the right to decide how to exercise that option at any time until the expiration date. As such, buying or selling an option does not mean that you must exercise it at the time of purchase/sale. This flexibility with options is a notable distinction from futures contracts and are considered derivative securities. This means that the price of options is derived from the value of assets like the market, securities or other underlying instruments. For this reason, options are often considered less risky than stock trading. Options trading is available at many brokerage firms and is a staple offering for most retail sites.
Options represent a contract that allows investors to buy or sell underlying instruments such as securities, exchange-traded funds (ETFs) or indices at a certain price over a certain period of time. Buying and selling options can be done in the options market, which trades security-based contracts. When trading options, the option price is therefore a percentage of the underlying asset or security. Investors who buy an option can buy shares later and are known as a call option, while buying an option that allows you to sell shares later is called a put option. Why Trade Options In particular, options differ from stock trading in that they do not represent ownership of a company. In addition, futures contracts use contracts in the same way as options, although options are considered much lower risk due to the fact that you can withdraw or close an options contract at any time. When buying or selling options, traders retain the right to decide how to exercise that option at any time until the expiration date. As such, buying or selling an option does not mean that you must exercise it at the time of purchase/sale. This flexibility with options is a notable distinction from futures contracts and are considered derivative securities. This means that the price of options is derived from the value of assets like the market, securities or other underlying instruments. For this reason, options are often considered less risky than stock trading. Options trading is available at many brokerage firms and is a staple offering for most retail sites.
Read this term for the magnitude of the rate increase at this meeting – increase the cash rate by 15 basis points, 25 basis points or 40 basis points
more recent data from linkage surveys and enterprise surveys indicated that labor costs were rising in a tight labor market and that a further recovery was likely in the period ahead. to come
agreed that raising the cash rate by 15 basis points was not the preferred option as the policy was very stimulative and it was highly likely that further rate hikes would be required
a 15 basis point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.
although going up inflation
Inflation
Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country according to the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term largely reflect global factors, members noted that strong domestic demand and capacity constraints also played a role
an argument for a 40 basis point hike could be made given the upside risks to inflation and the current very low level of interest rates.
members agreed that the preferred option was 25 basis points
the board reviewed whether the condition it had previously set for an increase in the cash rate was met
members observed that it would be more difficult to get inflation back on target if the psychology of inflation in Australia were to change in a lasting way
a move of this magnitude would help signal that the council was now returning to normal operating procedures
would have the possibility of reviewing the setting of interest rates in a relatively short period of time
members agreed that further interest rate increases would likely be needed to ensure inflation in Australia returns to target over time
Full Text:
Reserve Bank Board May 2022 Monetary Policy Meeting Minutes
The next RBA meeting will be on June 7. The only question on the next rate hike at the June meeting is how big it will be, 15 basis points will take the rate to 0.5% while 40 basis points will take it to 0.75%. These are just my guesses, maybe the RBA will choose another number of basis points to increase.
The graph of the cash rate. May’s rise was the first rise in more than 11 years. It is even very difficult to see the upside in the chart below.
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