Fed Softens Rate Hike Outlook as Australian Market Struggles
The US Federal Reserve (Fed) has softened its rate hike outlook, which has seen equity markets rise for a second consecutive week. Fed Governor Christopher Waller stated that recent inflation data had improved and, if incoming data continued to point in this direction, he would hold the federal funds rate at 16 September meeting.
This move saw the probability of a September Fed rate hike fall to about 50% from 68% earlier in the week. The change has also given investors some comfort with regards to the Middle East situation, as nothing has warranted fresh US strikes on Iran since Wednesday.
Closer to home, the Australian market is trading 70 points (-0.70%) lower on the week and is set to lock in a third week of losses in the past four. The decline followed this week's resilient Q2 GDP print, with annual growth at 2.1%, coming on the heels of the prior week's sticky trimmed mean inflation report.
The combination has pushed up the probability of a fourth Reserve Bank of Australia (RBA) rate hike this year, along with falling housing prices and profit-taking in big mining stocks.