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Statement Section: 1. Interest Rate Decision: The deposit facility rate remained unchanged at 2%, in line with expectations, marking the fourth consecutive meeting without change. The main refinancing rate and marginal lending rate remained unchanged at 2.15% and 2.40%, respectively. 2. Inflation Outlook: Inflation is projected to be 2.1% in 2025, 1.9% in 2026, 1.8% in 2027, and 2.0% in 2028. (September forecasts were 2.1%, 1.7%, and 1.9%, respectively) 3. Voting Results: The interest rate decision was unanimously passed. 4. Economic Outlook: GDP growth is projected to be 1.4% in 2025, 1.2% in 2026, 1.4% in 2027, and 1.4% in 2028. (September forecasts were 1.2%, 1.0%, and 1.3%, respectively) 5. Policy Outlook: No specific interest rate path was pre-committed, and all tools are prepared to be adjusted at any time. Lagardes Press Conference: 1. Economic Outlook: The economy is resilient. 1. **Services-led growth will continue in the near term.** Trade tensions have eased. 2. **Inflation Outlook:** Underlying inflation remains consistent with the 2% medium-term target. Forward-looking indicators suggest wage growth will slow. Inflation should decline in the near term. 3. **Interest Rate Outlook:** The ECB is well-positioned. No rate hikes or cuts were discussed today. All options should be on the table. 4. **Other Matters:** Given the uncertainty, we are simply unable to provide forward guidance. There is no preferred candidate for ECB President. Executive Board member Schnabel is one suitable candidate. 5. **Market Reaction:** The money market is pricing in a 45% probability of an ECB rate hike by March 2027, up from 35% before the statement was released.The European Central Bank expects inflation to be below 2% in the first quarter of 2026, the third quarter of 2026, and the fourth quarter of 2027.The European Central Bank projects wage growth of 4% in 2025, 3.2% in 2026, 2.9% in 2027, and 3% in 2028.The European Central Banks forecasts assume an oil price of $69.2 per barrel in 2025; $62.5 per barrel in 2026; $62.6 per barrel in 2027; and $64 per barrel in 2028.The United States threatened that South Africa would face consequences if the matter was not handled properly.

As a result of hawkish RBA minutes, AUD/JPY surges to around 93.00

Alina Haynes

Feb 21, 2023 15:20

As the Reserve Bank of Australia's minutes revealed a hawkish stance, the AUD/JPY pair surged to near 93.00 during the Tokyo session (RBA). The RBA minutes make it plainly clear that higher interest rates are essential because robust consumer demand prevents the Australian inflation rate from decreasing from its peak.

 

According to the minutes, RBA members considered a 50 basis point (bps) increase in interest rates in light of the persistence of inflation. Members of the RBA also remarked that the unemployment rate is at its lowest point in the past fifty years and that the number of job opportunities is astronomically high, which is a source of happiness for consumers who are injecting surplus income into the economy.

 

Aside from this, the Australian economy benefited from improved trade terms and would benefit more from China's openness than a number of other countries. The Chinese government's relaxation of pandemic laws has expanded Australia's trading potential.

 

Philip Lowe, governor of the Reserve Bank of Australia, anticipates that the cash rate will climb to 3.75 percent over time, with headline inflation decreasing to 4.75 percent by the end of 2023 and returning to approximately 3 percent by the middle of 2025.

 

Previously, S&P Global reported upbeat preliminary Australian PMI (Feb) data. The Manufacturing PMI hit 50.1, above both the consensus forecast of 49.9 and the prior figure of 50.0. The Services PMI increased from 48.4 (estimated) and 48.8 to 49.2. (previously released).

 

About the Japanese Yen, Bank of Japan (BoJ) Governor Haruhiko Kuroda stated, "Due to labor demand and inflation, wage growth is predicted. The Japanese Yen has not notably reacted to the preliminary Jibun Bank PMI (Feb) statistics, which were mixed. The Services PMI has risen to 53.6, surpassing both the consensus expectation of 51.5 and the prior figure of 51.1. While the Manufacturing PMI has declined to 47.4 compared to expectations and the previous reading of 48.9, it remains above the 50-point threshold indicating expansion.


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