At around 1.20pm AEDT the ASX was trending down 1.23% as RBA governor Philip Lowe faced the scrutiny of the Senate Estimates committee, which grilled him on the nine consecutive interest rate hikes the RBA has put in place since May last year.
The hikes were preceded, in more innocent times, by his unfortunate remarks that rates would stay low until 2024.
Lowe accepted that the series of rate rises hadn’t been popular, adding thousands of dollars per month to the average Australian mortgage, but insisted that they were based on a wide range of evidence and implemented by all nine members of the central bank, and not just Lowe as the public face of the board.
“There is a risk that the tightening policy that’s taking place will dampen spending more than we think,” he said, but went on to warn that the risk on the other side, of not acting and allowing inflation to go unchecked, would be “corrosive”.
“The risks are two-sided and we’re trying to navigate our way through a narrow path,” he said.
Commonwealth Bank posts record half-yearly profits
The markets were non-plussed by the Lowe cross-examination, which didn’t add anything that we don’t already know about how he is looking to proceed. We can expect the RBA to keep hiking rates until inflation starts to cool.
That said, if one of today’s news items can be directly traced back to the RBA’s relentless rate hikes, it’s the record half-yearly profit posted by the Commonwealth Bank. Australia’s most popular bank, by customer numbers anyway, reported that its cash profit was up 9% to $5.15 billion.
Loan impairment figures were up slightly but paled relative to the big profit the bank has turned.
The bank’s dividends are $2.10 per share, fully franked.
Following the profit announcement, and the sense that CBA is enjoying the rate hikes, treasurer Jim Chalmers asked the ACCC to investigate the banks’ approach to paying interest to savers.
Meanwhile, in the US
If the inflation situation in the US is any indication, Lowe and the RBA are in it for the long haul.
“The January inflation report supports the Fed’s latest mantra of ‘higher for longer’. The Fed will focus on the month-over-month readings that show inflation is accelerating. Disinflation trends will get tested here and that will probably be met with a steady chorus of hawkish pushback from the Fed,” said OANDA senior market analyst The Americas Edward Moya.
“Inflation increased by 0.5% in January, in line with forecasts and also much hotter than the 0.1% decline in December. On a monthly basis, core inflation ticked higher to 0.4%.
“Consumer prices from a year ago rose by 6.4%, hotter than the consensus estimate of 6.2%, and only a tick below the 6.5% prior reading. Inflation is showing signs of stickiness and that should cement the view that the Fed will continue to deliver more rate hikes.
“Inflation is like an onion. The first layer is commodities, then goods and then you get to core services. The problem with the disinflation playbook that a lot of traders are following is that by the time core services start softening, we could see some pricing pressures return to the first two layers.
“If core stickiness becomes a dominant theme over the next couple of inflation reports, we could start to see the market fully price quarter-point rate rises across the March, May and June FOMC meetings.
The Five at Five
Legacy Minerals shares surge after making new discovery at Bauloora Epithermal Gold Project
Legacy Minerals Holdings Ltd (ASX:LGM) shares have been as much as 53% higher to $0.245, a new record high, after diamond drilling intersected a significant new discovery at the Bauloora Epithermal Gold Project in New South Wales.
Stelar Metals acquiring four projects near Broken Hill with lithium potential along with cobalt and copper
Stelar Metals Ltd (ASX:SLB) has signed a deal with Everest Metals Corporation Ltd to acquire 90% interest in four large granted exploration licences with significant lithium potential along with cobalt and copper near the mining centre of Broken Hill in Far West New South Wales.
Anson Resources confirms large lithium exploration target at Green River, adjacent to Paradox Project
Anson Resources Ltd (ASX:ASN) has established a substantial exploration target at its recently staked Green River Lithium Project in the Paradox Basin in south-eastern Utah, USA. The target points to mineral resource potential in the same ballpark as Anson's flagship asset, the nearby Paradox Lithium Project.
Solis Minerals acquires 22 new lithium-prospective exploration licences in Brazil
Solis Minerals Ltd (TSX-V:SLMN, ASX:SLM) has acquired 22 new lithium exploration licences in northeast Brazil, forming the Borborema Project, with a focus on exploring for lithium and battery metals. The project covers 248 square kilometres, with similar regional structural controls to Latin Resources Ltd’s Colina deposit.
Pantoro raises $75 million to support Tulla Resources merger and Norseman ramp up
Pantoro Ltd (ASX:PNR) has received commitments to raise $75 million in an institutional placement from existing and new shareholders at an offer price of $0.06 per share. The funds raised from the placement along with existing cash will be used to support the final stages of the ramp-up of the Norseman Gold Project in Western Australia.
On your six
Uranium prices predicted to rise 'significantly higher' says Citi
Uranium prices are set to become “significantly higher” according to analysts at Citigroup. The investment bank said disruptions in nuclear supplies because of the war in Ukraine and a potential embargo on Russia’s supplies could send prices higher.
Currently, uranium is trading at US$50.55 per pound.
The one to watch
Legacy Minerals makes new discovery at Bauloora Gold Project
Legacy Minerals Holdings Ltd's Chris Byrne shares with Proactive news of a significant new discovery at the company’s Bauloora Epithermal Gold Project in NSW.