Banking News

After being forced to play catch-up in the ‘war on inflation’, Australia’s banking masters have subtly switched course

For the past six months, it’s been all action and precious little talk.

Last week, however, that all changed. After being forced to play catch-up in the “war on inflation”, our central banking masters have subtly switched course.

And once again, the shift was pioneered by Australia. A month back, Reserve Bank boss Phillip Lowe sparked a rally on global stock markets when he throttled back on the pace of interest rate rises from 0.5 percentage points back to 0.25, the first major central bank to do so.

They’ve been desperately seeking any sign of a let-up in the brutal round of rate hikes, and Australia delivered just that.

Reserve Bank Governor Philip Lowe gave perhaps the first sign of relief. (ABC News: John Gunn)

A few weeks later, the all-powerful American central bank, the US Federal Reserve, quietly let slip that it too was considering the same, possibly early in the New Year. Then, the Bank of Canada jumped on the bandwagon, cutting its rate hikes in half.

After a year of turmoil, the combination was enough to send a wave of jubilation through financial markets. Stocks, bonds and currencies all momentarily settled, even lurched into gear.

“Are we nearly there yet?” they all wondered.

A few pundits picked up on the trend, marvelling at just how much in lock-step global central banks had become. Not only were they all raising rates simultaneously, they all seemed to be employing exactly the same tactics in the wind-down.

Doing one thing, saying another

Last week, a new element crept into the playbook. On each occasion, sometimes within hours of the official announcements, each of the heads of these institutions contradicted themselves about what may lie ahead.

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