It’s January and the start of a new year. Whether you are back at work or enjoying a summer break, we wish you all a Happy New Year and a return to normal life in 2022.
The global economy and financial markets ended the year as they began, all over the place, as the world grappled with a new wave of COVID-19. In December, speculation about interest rate hikes grew on the back of rising inflation. US Federal Reserve chair, Jerome Powell said the Fed would not lift rates until it finished scaling back/tapering bond purchases in March. Fed officials expect three increases in the federal funds rate this year from the current 0-0.25% target to around 1.0%. In Australia, Reserve Bank governor Philip Lowe said he would not consider further scaling back bond purchases until the bank’s next meeting in February. He insists the cash rate will remain on hold at 0.1% until 2023, but the market anticipates a rate rise later this year.
Australia’s economic growth fell 3.9% in the year to September, as household spending fell during extended lockdowns. As lockdowns ended and businesses began hiring, the unemployment rate fell from 5.2% to 4.6% in November. The ANZ-Roy Morgan consumer sentiment index hit a six-week high of 108.4 in the lead up to Christmas. One cause for optimism may have been rising house prices, which were up 1% in December and 22% over the year.
Consumers also enjoyed some relief at the petrol bowser ahead of Christmas, but global oil prices remain volatile as markets weigh up reduced travel and falling demand for fuel due to Omicron and uncertain supply from OPEC producers. The Aussie dollar finished 2021 at US72.5c, a big drop from where it started at US77c.