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Fed hikes rates to 22-year high

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The Federal Reserve raised interest rates on Wednesday, bringing them to a 22-year high.

Fed Chairman Jerome Powell announced a quarter-point hike, taking the benchmark federal-funds rate to a range between 5.25% and 5.5%.
This marked the 11th increase in the past 12 meetings, following a brief pause in the previous month. Powell signaled the possibility of another increase before the year’s end as the Fed continues to grapple with stubbornly high inflation.

Powell stated that the process of reducing inflation to the target of 2% still has a long way to go.

The Fed believes that they will need to hold policy at restrictive levels for some time and may consider raising rates further if necessary. Despite the challenging inflationary environment, the Fed staff is no longer forecasting a recession, although they expect a noticeable slowdown in growth later this year.

Too strong economy

The strong economy, with robust job gains and moderate growth, has prompted the Fed to maintain a cautious approach to rate cuts. Powell ruled out the possibility of cutting rates this year, indicating that they would only consider cutting rates when they are comfortable doing so.

The higher interest rates could impact consumers, making borrowing for homes and cars more expensive, potentially dampening consumer spending. Credit card interest rates have also surged to the highest levels in recent years. However, the positive stock run has continued, with the Dow hitting its best streak since 1987.

The Fed’s next meetings are scheduled for September, November, and December, where further policy decisions will be made based on economic developments and inflationary pressures.

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Money

Moody’s downgrades China credit outlook, cites growth concerns

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Moody’s Investors Service has downgraded China’s credit outlook, expressing concerns about the country’s economic growth prospects and the ongoing property market crisis.

The credit rating agency revised its outlook from stable to negative, citing a combination of factors that are putting pressure on China’s economy.

China’s economic growth has been slowing down in recent years, and Moody’s warns that this trend is expected to continue. The country faces challenges such as high debt levels, a rapidly aging population, and a declining labor force. These factors could hamper its ability to sustain robust economic growth in the future.

Additionally, the ongoing property market crisis in China is a major concern for Moody’s. The real estate sector has been a significant driver of the country’s economic growth, but it is currently experiencing a severe downturn with falling property prices and a growing number of unsold homes. This crisis has the potential to further weigh on China’s economic performance.

Moody’s decision to downgrade China’s credit outlook raises questions about the country’s ability to manage its economic challenges effectively. It also underscores the importance of addressing issues in the property market to prevent a broader economic crisis.

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Money

Australia Post to shift to alternate-day mail delivery

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In a move aimed at modernising its operations and accommodating the growing e-commerce industry, Australia Post has announced plans to reduce letter deliveries to every second day.

This significant shift is part of a broader strategy to expand its parcel business and adapt to changing consumer preferences.

Australia Post has recognized the declining demand for traditional letter services in an increasingly digital age. With more people communicating electronically and relying on email and messaging apps, the postal service has faced challenges in sustaining daily mail deliveries. By transitioning to alternate-day letter delivery, Australia Post aims to optimize its resources and focus on meeting the surging demand for parcel deliveries, driven by the booming online shopping market.

This strategic shift comes as a response to the changing landscape of postal services worldwide. Many postal agencies are diversifying their services to remain relevant and profitable. Australia Post’s move is expected to not only streamline its operations but also reduce costs associated with daily letter deliveries, ultimately benefiting both the organization and its customers.

While the change may be welcomed by those who prefer faster parcel deliveries, it raises questions about the impact on individuals and businesses reliant on daily mail services. Australia Post will need to address concerns regarding the potential delay of important correspondence and provide solutions to ensure minimal disruption for customers during this transition period.

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RBA maintains 4.35% rates as mortgage applications surge

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The Reserve Bank of Australia (RBA) has decided to keep its official cash rate at 4.35%, citing concerns over the rapidly increasing number of mortgage applications.

This decision comes after several consecutive meetings where the RBA has refrained from adjusting interest rates.

The central bank’s decision to hold rates steady reflects their cautious approach to managing the current housing market boom. Mortgage applications have seen a significant surge in recent months, driven by record-low interest rates and increased demand for housing. While this has been a boon for the real estate industry, it has raised concerns about the potential for a housing bubble and financial stability.

Experts are divided on whether the RBA’s decision is the right course of action.

Some argue that maintaining low-interest rates is necessary to support economic recovery, especially in the wake of the COVID-19 pandemic. Others worry that the continued surge in mortgage applications without rate adjustments could lead to unsustainable levels of household debt.

In light of this decision, homeowners, prospective buyers, and investors will be closely watching the housing market’s trajectory and wondering how long the RBA can maintain its current stance.

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