That outlook has not gone down well with consumers as
Westpac's latest survey showed sentiment slid 6.9% to depths
usually associated with recessions. The bleak mood has yet to have much impact on what consumers
actually do, with weekly spending on bank cards still resilient,
though analysts assume that will have to change as mortgage
payments rise ever higher.
The risk that further aggressive hikes will slow the economy
has been reflected in a flatter yield curve. The spread between
10- and three-year bonds has narrowed to 29 basis points, from
as wide as 53 basis points in late December.
The Australian curve rarely inverts completely like it does
in the United States, with the last stretch during the global
financial crisis.
There was better news for the Reserve Bank of New Zealand as
its survey of inflation expectations showed the two-year outlook
slowed to 3.3% this quarter, from 3.62% in the December quarter.
That should offer some reassurance that inflation
expectations are staying anchored near the bank's 1-3% inflation
target.
(Reporting by Wayne Cole; Editing by Edwina Gibbs)
By Wayne Cole
SYDNEY, Feb 14 (Reuters) - The Australian and New
Zealand dollars were trying to sustain a rally on Tuesday after
a bounce on Wall Street improved risk sentiment globally and
Australian data underlined the case for further increases in
interest rates at home.
The Aussie eased slightly to $0.6954 , after
climbing 0.7% overnight and away from support at $0.6890.
Resistance lies at $0.7011. The kiwi edged back to $0.6334 , having added almost 0.8% overnight.
Aiding the Aussie was a surprisingly upbeat survey on
business conditions which showed sales hit historically high
levels in January, contradicting talk of a slowdown. The NAB survey also showed cost pressures had ticked higher,
an unwelcome development for the Reserve Bank of Australia (RBA)
as it struggles to contain inflation.
The central bank lifted interest rates a quarter point to a
decade-high of 3.35% last week and wrongfooted many by warning
that at least two further hikes were on the cards.
Markets responded by raising the expected top for rates to
around 4.1%, from 3.6% a month before. "Our business survey measures of costs and prices appear to
have peaked but remain very high with strength evident across
all industries," said NAB chief economist Alan Oster.
"We continue to expect strong prints for wages and inflation
to continue in the near term," he added. "NAB now sees the RBA
lifting rates to a peak of 4.1% in May, including 25bp increases
at each of the next three meetings."
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