Rates tipped to rise as RBA warns it will overlook weakness in some sectors: Midday Roundup

The Reserve Bank has warned it will ignore some aspects of weakness in the economy when it comes to setting interest rates, leading economists to believe another cash rate increase is inevitable within the next few months.

While the RBA said in the minutes of its May meeting the current cash rate is still appropriate, and that some aspects of the economic are still “tightened”, it added that monetary policy “had to be set for the needs of the overall economy”.

“In this respect, members judged that if economic conditions continued to evolve as expected, higher interest rates were likely to be required at some point if inflation was to remain consistent with the medium-term target.”

Economists are expecting another rate rise in the second half of the year, with August pinned as the most likely month, although some believe a rise could come as early as June.

The RBA also noted that while the mining boom is increasing inflationary pressures, the higher Australian dollar and increased savings rates are helping to contain the upward movement.

“Nonetheless, the staff forecast was for underlying inflation to be in the top part of the target band over the next couple of years and, based on the interest rate path implicit in recent financial market pricing, above 3% towards the end of the forecast period,” the central bank said.

Fairfax flags radio asset sale

Fresh from a public dispute with its employees over plans to outsources its subbing at flagship newspaper The Age and Sydney Morning Herald, diversified media group Fairfax Media has confirmed that it is looking to offload its radio assets.

Fairfax told the market this morning that a sale of its metropolitan and radio assets would start within weeks after “strong expressions of interest from prospective acquirers.”

The radio assets, which include high-rating talkback stations 2UE and 3AW in Sydney and Melbourne, could sell for hundreds of millions of dollars, according to media reports.

Fairfax shares, which dropped on a guidance downgrade, were 1% higher at 11.44 AEDT to $1.05.

Business lending on the up

In other news, official figures show an increase in business lending for March, with seasonally adjusted commercial finance commitment soaring 13.3% to $32.73 billion.

Fixed lending commitments for business skyrocketed 17.1%, following a 10% fall in February.

The figures follow housing finance numbers yesterday showing the number of loans fell by 1.6% in March, the third consecutive fall and amounting to a 12% dive since December.

Local shares open lower

The Australian sharemarket has opened flat this morning following a weak night on Wall Street.

The benchmark S&P/ASX200 index was up only 0.7 points or 0.02% to 4650.8 at 12.10 AEST, while the Australian dollar rose slightly to $US1.05.

AMP shares gained 0.59% to $5.20, while Commonwealth Bank shares lost 0.02% to $51.47. Westpac lost 0.66% to $22.56 as ANZ lost 0.13% to $22.29.

James Hardie to buy-back shares

Building products maker James Hardie will purchase 5% of its shares through a market buyback over the next 12 months as part of a new management strategy.

“After careful consideration and in seeking to create a more optimal capital structure, the board is pleased to announce the resumption of an active approach to capital management,” chairman Michael Hammes said in a statement.

“This opportunity arises because of the company’s ability to generate strong cashflows, and thereby reduce debt levels, despite the continuing challenging operating environment, particularly in the USA.”

The announcement sent the company’s shares up 4.5% this morning to $5.93.