RBA Signals Patience on Rates, Cooling Hike Bets

The era of interest rate cuts in Australia has likely concluded, Reserve Bank Deputy Governor Andrew Hauser announced, reinforcing the central bank's recent guidance that its easing cycle is over.

"I know that won't be the message that everyone watching this will want to hear," Hauser said in a televised interview on Thursday. He stated that inflation above 3% is "too high" and emphasized the central bank's commitment to its target.

"We wish to keep inflation between 2 and 3%," he said.

Inflation Remains Top Concern

Hauser's comments came just a day after official data showed that while Australia's inflation rate slowed in November, both the headline and underlying measures continue to exceed the Reserve Bank of Australia's (RBA) 2-3% target band.

This persistent inflation is the primary reason for the central bank's shift in focus.

A Decisive Pivot in Monetary Policy

The RBA has held its benchmark interest rate at 3.60% since its final cut in August. The bank is now concentrating on taming renewed inflationary pressures, which are being fueled by a tight labor market and weak productivity growth.

Minutes from the RBA's most recent meeting indicate that policymakers have already begun discussing conditions that might require rate increases. Officials also noted that they are still waiting to see the full impact of the 75 basis points of easing delivered between February and August.

What's Next for the RBA?

The central bank will likely wait for the quarterly inflation report, due on January 28, before deciding if a more definitive policy pivot is necessary.

Financial markets are already pricing in a meaningful chance of a rate hike by May. Economists, however, remain divided on the RBA's next move.

A Challenging Economic Backdrop

As the RBA navigates policy into 2026, it faces a challenging and mixed economic environment.

On one hand, consumers are becoming more cautious. Real per-capita spending is largely flat, and the savings ratio is rising as households rebuild their financial buffers. On the other hand, the RBA still considers the labor market to be tight and the output gap to be positive, creating a difficult balancing act for setting monetary policy.

A top official at Australia's central bank has clarified that while the recent slowdown in consumer price inflation is a positive development, the battle against high prices is far from over.

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser acknowledged that the November inflation data was "helpful" but noted that the figures were largely in line with the bank's forecasts and that inflation remains above the target range.

November CPI Meets Expectations

Data released on Wednesday showed Australia's annual CPI inflation eased to 3.4% in November, down from 3.8% in the prior month. According to Hauser, these numbers were broadly expected by the central bank.

Despite the slowdown, he emphasized the RBA's position. "Inflation above 3% — let's be clear, it's too high," Hauser stated. "We wish to keep inflation between 2 and 3 percent, that is currently above that."

The RBA's long-term goal is to maintain inflation within a 2-3% band, with a midpoint focus of 2.5%. The central bank's preferred measure of core inflation registered 3.2% in November, a slight decrease from 3.3% the previous month.

Policy Outlook Hinges on Broader Data

The RBA board had previously warned in December that interest rates, currently at 3.6%, might need to rise further if inflation did not cool sufficiently, a response to an acceleration in prices during the third quarter.

Hauser confirmed the board is now awaiting the full Consumer Price Index figures for the fourth quarter, due later this month, to get a clearer picture of the inflation trend.

However, he stressed that the central bank will not base its policy decisions on a single data release. Instead, the board will consider the state of the entire economy when determining the outlook for inflation and future interest rate movements.

Australia is bracing for catastrophic fire risk in parts of Victoria on Friday as the country swelters through its worst heat wave since the Black Summer bushfires in the summer of 2019 and 2020.

Temperatures rose above 45C (113F) in some places as the heat wave baked Adelaide and South Australia, before being driven east by a low pressure trough toward the heavily-populated states of Victoria and New South Wales. Melbourne recorded its hottest temperature since January 2020 on Wednesday.

The heat wave is expected to move toward New South Wales, home to Australia's largest city of Sydney, on Thursday, while thunderstorm conditions including bursts of dry lightning on Friday are forecast to escalate the fire risk across Victoria.

Several bushfires are already burning in the state, with evacuation orders issued for small communities in the path of the blazes. The Bureau of Meteorology is currently forecasting extreme or catastrophic fire danger for all parts of Victoria on Friday, the highest possible warning levels.

"There is very little if any rainfall expected with these thunderstorms," the bureau's Sarah Scully said in a video forecast, adding that the rain was mostly evaporating before it reached the ground. "This leads to a risk of dry lightning that could potentially ignite new fires. But as well, you've got the damaging wind gusts that will hit the ground and spread out, creating potentially erratic fire behavior."

Australia's most recent major bushfire disaster took place over the 2019-20 Southern Hemisphere summer. Known as Black Summer, the wildfires devastated 24 million hectares of land, killing 33 people and potentially billions of animals. A report published by Australia's Climate Council think tank on Tuesday found that millions of people on the outskirts of major cities are now at risk of urban wildfires due to urban sprawl.

The heat wave could drive a spike in electricity demand and higher wholesale prices due to increased air-conditioner use, according to Johanna Bowyer, an analyst at the Institute for Energy Economics and Financial Analysis. Coal- and gas-fired power plants may see their maximum capability limited due to reduced cooling efficiency at higher temperatures, she said.

Source: Bloomberg Europe

South Korean prosecutors said they have sought an arrest warrant for Michael ByungJu Kim, the billionaire co-founder and chairman of private equity firm MBK Partners Ltd.

Warrants were requested late Wednesday for four people, including Kim, a spokesperson from the Seoul Central District Prosecutors' Office said via text message to Bloomberg News on Thursday.

"This case involves charges of violating the Financial Investment Services and Capital Markets Act," a court spokesperson told Bloomberg, adding they had "concerns about disclosing details of the case," so were only making a small amount of information public for now.

"We are not confirming whether there is one charge or more than one," the court spokesperson said.

The 62-year-old billionaire's buyout firm has been in the spotlight for several months amid probes over the acquisition and subsequent management of Homeplus, once South Korea's second-largest supermarket chain.

MBK Partners said in a statement that the prosecutor's action was "excessive and unjustified" and said they would "vigorously contest" it through the judicial process.

"The prosecution's request for an arrest application reflects a fundamental misunderstanding of both the intent and actions of the controlling shareholder, which sought to revive Homeplus through court-supervised restructuring at a time when the company was facing serious financial distress," the statement said.

"MBK Partners categorically rejects all allegations underlying this warrant application. The request is inconsistent with the established facts and rests on a distorted interpretation of events."

Kim has an estimated fortune of $9.4 billion, according to the Bloomberg Billionaires Index, with the bulk of it coming his majority stake in one of Asia's most prominent private equity firms.

Source: Bloomberg Europe

The United States must maintain indefinite control over Venezuela's oil sales and revenue to achieve its desired political changes in the country, according to Energy Secretary Chris Wright.

Speaking Wednesday at the Goldman Sachs Energy, CleanTech & Utilities Conference in Miami, Wright's comments underscored the strategic importance of Venezuela's vast crude reserves following the ouster of leader Nicolas Maduro by U.S. forces in Caracas on Saturday.

"We need to have that leverage and that control of those oil sales to drive the changes that simply must happen in Venezuela," Wright stated.

The Strategy for Managing Venezuelan Crude

The U.S. plan involves a two-stage process for bringing Venezuelan oil to market. Wright explained that the U.S. would first sell off Venezuela's stored oil inventories before marketing its ongoing future production.

Revenues from these sales, including those to specialized U.S. refineries, will be deposited into accounts controlled by the U.S. government.

Wright also confirmed he is in discussions with American oil companies to determine what conditions would be necessary for them to re-enter Venezuela and help increase its output.

"The resources are immense. This should be a wealthy, prosperous, peaceful energy powerhouse," he said. "That's the plan."

A $2 Billion Export Deal Signals Shift

The strategy follows a deal reached Tuesday between Caracas and Washington to export up to $2 billion worth of Venezuelan crude to the United States. This agreement helps divert supplies previously destined for China and allows Venezuela to avoid deeper production cuts.

This accord is seen as a direct response to President Donald Trump's demand that Venezuelan officials open the nation's oil industry to U.S. companies or face the risk of further military intervention. Trump has publicly stated he wants interim President Delcy Rodriguez to grant the U.S. and private firms "total access."

"Instead of the oil being blockaded as it is right now, we're going to let the oil flow," Wright said at the conference. He argued that selling the oil "will benefit the American people, the American economy and global energy markets, but of course, it will also massively benefit the people of Venezuela."

Following the news, shares of U.S. refiners Marathon Petroleum, Phillips 66, and Valero Energy saw gains of between 2.5% and 5%.

White House Engages with Oil Majors

Boosting Venezuelan crude production is a primary objective for the Trump administration. The president is scheduled to meet with heads of major oil companies at the White House on Friday to discuss the matter.

Sources familiar with the meeting said representatives from Exxon Mobil, ConocoPhillips, and Chevron would be in attendance. All three U.S. energy giants have previous experience operating in Venezuela. The companies have declined to comment on the meeting.

Rebuilding Venezuela's Production Capacity

Venezuela, which sits on the world's largest oil reserves, has seen its production collapse due to mismanagement and a lack of foreign investment. After producing as much as 3.5 million barrels per day (bpd) in the 1970s, its output averaged only about 1.1 million bpd last year, accounting for just 1% of the global supply.

Wright expressed optimism that short-term production increases are feasible. "We could get several hundred thousand barrels a day of additional production in the short to medium term if the conditions are there for just small capital deployments," he said.

However, a full recovery to historical levels presents a much larger challenge. "To get back to the historical production numbers, you know that takes tens of billions of dollars and significant time," Wright concluded.

Gold steadied, after slipping nearly 1% in the previous session ahead of US jobs data and an annual rebalancing of broad commodity indexes.

Bullion was near $4,460 an ounce on Thursday, with passive tracking funds due to start selling precious metals futures to match new weightings required by the indexes. Sales are expected to be greater than usual due to the surge in precious metals over the past year.

Citigroup Inc. estimated outflows of $6.8 billion from gold futures contracts and roughly the same amount from silver due to the reweighting of the two largest commodity indexes.

Traders are also turning their attention to the release of key US economic data on Friday, including the December jobs report. A softer print would support rate-cut bets, a tailwind for non-yielding precious metals.

Gold edged up 0.1% to $4,460.96 an ounce as of 7:32 a.m. Singapore time. Silver rose 0.6% to $78.62 after plunging nearly 4% in the earlier session. Platinum also recovered some losses from Wednesday, while palladium gained. The Bloomberg Dollar Spot Index ended the earlier session up 0.1%

Source: Bloomberg Europe