Bassanese Bites: RBA to cut – Week beginning: 06 May 2019

Global equities ended last week on the front foot after initially being disappointed earlier in the week by the failure of the Fed’s latest meeting to even hint at a rate cut later this year.  But given the ongoing strength in the US economy, the markets were hoping for too much in this regard  – despite President Trump’s shrill cries for lower rates.

Indeed, the great news at present is that the US economy is enjoying the combination of both good growth and low inflation – as evident on Friday with bumper jobs growth yet still only muted growth in average hourly earnings.  At 3.6%, the US unemployment rate is now the lowest since 1969!  Annual growth in average hourly earnings, meanwhile, is only 3.2% – still comfortably below the 4%+ levels that historically have preceded restrictive Fed policy and inevitable recession.  The earnings reporting season also rolls on with no new major negative shocks.

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