Australia’s Westpac Leading Index rose slightly from -1.04% to -0.94% in February, but it still marks the seventh consecutive month of negative growth rate, pointing to below-trend growth over the next 3-9 months. This is in line with Westpac’s forecast that growth in the Australian economy will be only 1% in 2023.
The slowdown reflects the lagged effects of rising interest rates, a deep shock to real wages, a bottoming out of the savings rate, and falling house prices. Westpac also expects the weakness to extend into 2024, with more negative readings likely.
RBA indicated in its March minutes that the board intends to consider a pause at its April meeting. However, Westpac does not expect that a decision to pause in April will mark the end of the cycle. It expects new information for the May meeting to indicate the need for a further response from the board, with a final 0.25% increase in the cash rate in May marking the end of the tightening cycle.
Fed Harker: It will soon be time to boringly taper
Philadelphia Fed Bank President Patrick Harker said, “I am in the camp that believes it will soon be time to begin slowly and methodically — frankly, boringly — tapering our $120 billion in monthly purchases of Treasury bills and mortgage-backed securities.”
Harker expected the economy to grow by 6.5% this year, and moderate to 3.5% next. He also expects inflation to be around 4% this year, and then slow back to 2% in 2022. “We’re already seeing some moderation there, as prices of used cars finally stabilize,” he added.