RBA Board keeps interest rates on hold again as high inflation digs in

In a widely predicted move, the Reserve Bank of Australia board decided to keep rates on hold at its meeting this afternoon.

In a statement, the board said the cash rate will remain at 4.35 percent, while the interest paid on exchnage settlement balances will also be unchanged at 4.25 percent.

The RBA noted that while inflation has fallen since its peak in 2022, the rate of inflation is still outside the board’s target range of between 2 and 3 percent.

“In underlying terms, as represented by the trimmed mean, the CPI rose by 3.9 percent over the year to the June quarter, broadly as forecast in the May Statement ob Monetary Policy,” the board said. “But the latest numbers also demonstrate that inflation is proving persistent.”

Noting that the economic outlook is uncertain and the road to a more manageable rate of inflation is slow and bumpy, the RBA board now predicts that the 2 to 3 percent rate is more likely to take at least another 12 months. The board has repeatedly stated its resolve to bring inflation to heel since it hit a high of 7.8 percent in December 2022.

“This represents a slightly slower return to market than forecast in May, based on estimates that the gap between aggregate demand and supply in the economy is larger than previously thought,” the board said. “In part, this reflects an increase in the forecast for domestic demand. But it also reflects a judgement that the economy’s capacity to meet that demand is somewhat weaker than previously thought, evidenced by the persistence of inflation and ongoing strength in the labour market.”

Research director at CoreLogic Asia Pacific, Tim Lawless, said the decision was unlikely to impact housing demand.

“Although a stable interest rate decision is seen as a positive for borrowers and housing more broadly, we aren’t expecting today’s outcome will have a material influence on housing trends,” Mr Lawless said. “While stable rates and lower inflation should help to lift consumer sentiment, which has historically shown a close relationship with property sales, the August hold decision may not be enough to see that rise in consumer sentiment flow through to housing market activity.

“Recent growth in property prices has had more to do with low supply, tight rental conditions and demographic factors than sentiment through the housing upswing to date.”

He pointed out that other factors, including ongoing problems with housing affordability and slowing migration were more likely influencing easing property prices.

“Even if sentiment lifts, an improvement in affordability barriers or strengthening in household balance sheets isn’t likely until interest rates start to fall,” he said.

The RBA board is expected to meeting again in six week’s time.

Alibaba Group co-founder Jack Ma said competition will make the company stronger and the e-commerce giant needs to trust in the power of market forces and innovation, according to an internal memo to commemorate the company’s 25th anniversary.

“Many of Alibaba’s business face challenges and the possibility of being surpassed, but that’s to be expected as no single company can stay at the top forever in any industry,” Ma said in a letter sent to employees late Tuesday, seen by The Wall Street Journal.

Once a darling of Wall Street and the dominant player in China’s e-commerce industry, the tech giant’s growth has slowed amid a weakening Chinese economy and subdued consumer sentiment. Intensifying competition from homegrown upstarts such as PDD Holdings ’ Pinduoduo e-commerce platform and ByteDance’s short-video app Douyin has also pressured Alibaba’s growth momentum.

“Only with competition can we become stronger and allow the industry to remain healthy,” Ma said.

The letter came after Alibaba recently completed a three-year regulatory process in China.

Chinese regulators said in late August that they have completed their monitoring and evaluation of Alibaba after the company was penalized over monopolistic practices in 2021. Over the past three years, the company has been required to submit self-evaluation compliance reports to market regulators.

Ma reiterated Alibaba’s ambition of being a company that can last 102 years. He urged Alibaba’s employees to not flounder in the midst of challenges and competition.

“The reason we’re Alibaba is because we have idealistic beliefs, we trust the future, believe in the market. We believe that only a company that can create real value for society can keep operating for 102 years,” he said.

Ma himself has kept a low profile since late 2020 when financial affiliate Ant Group called off initial public offerings in Hong Kong and Shanghai that had been on track to raise more than $34 billion.

In a separate internal letter in April, he praised Alibaba’s leadership and its restructuring efforts after the company split the group into six independently run companies.

Alibaba recently completed the conversion of its Hong Kong secondary listing into a primary listing, and on Tuesday was added to a scheme allowing investors in mainland China to trade Hong Kong-listed shares.

Alibaba shares fell 1.2% to 80.60 Hong Kong dollars, or equivalent of US$10.34, by midday Wednesday, after rising 4.2% on Tuesday following the Stock Connect inclusion. The company’s shares are up 6.9% so far this year.

RBA Board keeps interest rates on hold again as high inflation digs in

While good news for borrowers, it is unlikely to impact on demand for housing, industry expert says

“Only with competition can we become stronger and allow the industry to remain healthy,” Ma said