The AUD GBP exchange rate was slightly lower on Tuesday after the latest interest rate and policy update from the Reserve Bank of Australia. The bank left rates and bond-buying unchanged but stuck to its 2024 interest rate hike plans.
The AUD to GBP exchange rate is trading at 0.5340 after a recent rally faded.
Reserve bank refuses to budge on rate outlook
The Reserve Bank of Australia is digging its heels in and reiterating that interest rates will not rise until at least 2024.
At its regular monthly meeting, the RBA held the official cash rate at record lows of 0.1 per cent where it has been since November last year. The decision was widely expected by analysts after recent statements from the bank’s governor Philip Lowe.
The RBA also stuck to its decision to wind down purchases of government bonds to $4 billion a week, holding them at that rate until at least mid-February of next year. Lowe said the RBA expected the jobs market and the broader economy to recover quickly once lockdowns end.
“Looking forward, the bank’s business liaison and data on job vacancies suggest that many firms are seeking to hire workers ahead of the expected reopening in October and November,” he said.
However, despite expectations for a recovery in jobs, Dr Lowe said the bank is not expecting a breakout in wages or inflation. Lowe said wage and price pressures across the country were “subdued” and talked down concerns of inflation.
“[The bank] will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The central scenario for the economy is that this condition will not be met before 2024,” he said.
The last time the bank increased its official interest rates was way back in November 2010 when they were raised to 4.75 per cent. That condition has fuelled what many fear is an unsustainable property bubble.
UK car sales tumble in September, companies hike prices
The UK car market has seen its weakest September since 1998, despite record sales of electric cars. New car registrations plunged by 34% compared with September 2020 to over 215,000, which is the weakest September since 1998.
Supply issues caused by semiconductor shortages “continue to plague” the industry, said the Society of Motor Manufacturers and Traders.
UK companies were also seen hiking prices at the fastest pace on record last month, as the energy crisis and staff shortages hit the economy.
Tim Moore, economist at IHS Markit, said companies are passing on rising costs to consumers:
“The supply chain crisis put a considerable brake on recovery in the UK service sector during September. Survey respondents widely noted that shortages of staff, raw materials and transport had resulted in lost business opportunities. Consequently, new orders expanded at the slowest pace since the end of the winter lockdown, while backlogs of work accumulated as service providers struggled to find candidates to fill vacancies.”