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Australia’s Central Bank Flags More Rate Rises, 75 Bp Moves Unlikely 

Australia’s top central banker on Tuesday flagged a lot more policy tightening ahead as rates were still “very low” and it was important that higher inflation did not feed into public expectations and wage claims. 

Yet, Reserve Bank of Australia (RBA) Governor Philip Lowe also played down the chance of rates being increased by a super-sized 75 basis points and took issue with market pricing of rates reaching as high as 4% by year end. 

Lowe warned price pressures continued to build both globally and domestically and inflation was now seen reaching 7% by the end of the year, up from a previous forecast of 6%. 

That would be the highest pace in decades and far above the RBA’s long-term target band of 2-3%. 

“As we chart our way back to 2 to 3% inflation, Australians should be prepared for more interest rate increases,” warned Lowe in a speech. “The level of interest rates is still very low for an economy with low unemployment and that is experiencing high inflation.” 

The official cash rate is currently at 0.85% having been lifted by 50 basis points earlier this month following an initial quarter-point hike in May. 

Full coverage: REUTERS 

German Tax Take Soars, But War Clouds Outlook 

Germany’s estimated tax take over the first five months of the year was 15.1% higher than last year, thanks partly to a strong recovery from the pandemic and despite the war in Ukraine, the Finance Ministry said. 

The estimated tax take for May – by both central and regional governments – was up 10% on a year earlier to nearly 55 billion euros ($58 billion), the ministry added in its monthly report. 

The ministry said there were high levels of uncertainty about developments over the rest of the year, due partly to the war in Ukraine. 

Full coverage: REUTERS 

WORLDWIDE: HEADLINES 

Asian Shares Rise As Investors Pause After Selloff  

Asian stocks and U.S. share futures turned higher on Tuesday as the market took stock after a recent steep selloff, but concerns remain that aggressive central bank rate hikes to curtail inflation could spark a global recession. 

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.85% in early trading, edging up from a more than five-week low hit the previous day. 

Japan’s benchmark Nikkei average (.N225) opened up 1.16%, and Nasdaq and S&P500 e-mini share futures , each rose nearly 1.5%. 

“I think the green that we’re seeing this morning is not necessarily a function that people are moving back in towards risk assets,” said Kerry Craig, global market strategist at JPMorgan Asset Management. 

“It’s just the normal behavior on the very large selloff to get some reprieve and breathing space come through because fundamentally, nothing has changed on the macro front last week.” 

Chinese blue chips (.CSI300) rose 0.5%. 

Central banks around the world are looking to raise interest rates aggressively to curb rising inflation, a sentiment underscored on Tuesday by Reserve Bank of Australia (RBA) Governor Philip Lowe, who pointed in a speech to further rate hikes. 

Full coverage: REUTERS 

Aussie Dlr Edges Up As RBA Reaffirms More Hikes Ahead, Yen Struggles 

The Australian dollar rose on Tuesday after the central bank flagged more rate hikes were on the way, but the uptick was restrained by lower commodity prices, while the Japanese yen languished near a 24-year low. 

The Aussie was 0.3% higher at $0.69675, extending the previous day’s small gains, after Reserve Bank of Australia (RBA) Governor Philip Lowe signalled a lot more policy tightening ahead. 

Lowe said rates were still “very low” and it was important that higher inflation did not feed into public expectations and wage claims. 

RBA minutes from its June meeting, at which the central bank raised rates by a larger than expected 50 basis points, highlighted the central bank’s concerns about inflation. 

Still, the Aussie dollar is facing pressure from lower commodity prices, and analysts at CBA said further falls in iron ore prices would weigh on the currency in the near term while slowing global growth would be a drag in the longer term. 

“We forecast AUD/USD will spend most of the next twelve months in a 0.60‑0.70 range,” they said in a note. 

Full coverage: REUTERS  

Oil Rises On Market Caution Over Supply Concerns 

Oil prices rose 1% in early trade on Tuesday, clawing back more of last week’s losses as the focus returned to tight supply of crude and fuel products versus concerns about a recession hitting demand down the track. 

Brent crude futures rose $1.32, or 1.2%, to $115.45 a barrel at 0040 GMT, adding to a 0.9% gain on Monday. The benchmark contract fell 7.3% last week in its first weekly fall in five. 

U.S. West Texas Intermediate (WTI) crude futures rose to $111.51 a barrel, up $1.95, or 1.8%, from Friday’s close. There was no settlement on Monday, which was a U.S. public holiday. WTI dropped 9.2% last week. 

Supply concerns are buoying the market, as Western sanctions on Russian oil bite and questions linger over how Russian output might fall due to sanctions on equipment needed for production, analysts said. 

“The market remains cautious about disruptions to Russian oil as European sanctions kick in,” ANZ Research analysts said in a note. 

Full coverage: REUTERS