US is preparing the RBA for some painful decisions
Last weekend the European Central Bank raised eurozone interest rates by 50 basis points. It was the first rate hike since a short-term and ill-fated attempt to normalize its tariff structure in 2011, which sparked an existential crisis in the European Union that only eased when it reversed course and Mario Draghi vowed to do “whatever it takes.” ” to restore stability and keep the European Union from falling apart. The euro’s weakness relative to the US dollar exacerbated the impact of Russia’s Russia-dependent Europe energy crisis – oil and gas are priced in US dollars – while driving up import costs more generally and offsetting any benefits to exports. Even Germany, an export powerhouse, posted a trade deficit for the first time in decades. Australia’s RBA may raise interest rates by 0.5 percentage point for the third month in a row when it meets in early August. Credit: Louie Douvis The ECB, particularly sensitive to the specter of fragmentation – weaker ...