Finance
Shock to ‘force’ RBA to cut interest rates further than expected: ‘More aggressive’
The Reserve Bank of Australia (RBA) could be pushed to take a “more aggressive” rate-cutting approach following the conflict in the Middle East and the potential oil price shock. Some analysts now expect the central bank could cut interest rates a further three times this year.
KPMG has estimated the conflict in the Middle East could shave between 0.15 and 0.20 per cent of the GDP from the Australian economy this year, should the world oil market react in a similar way to how it responded to the first Iraq War. It said an “oil shock” combined with the continuing threat of a global tariff fallout could “force” the RBA’s hand.
“The longer an oil price shock is sustained, the worse its impact is in terms of inflation outcomes, inflation expectations and short-term growth,” KPMG said.
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“This is because oil price shocks can be particularly damaging to an economy like Australia’s as the road transport sector — one of the heaviest users of oil in our economy — touches every single other sector (including itself) across the country.”
Global oil prices slid 7.2 per cent on Monday following Iran’s retaliatory missile strike on a US airbase. The Brent crude price fell to around $US70 a barrel. This has eased fears of major supply disruptions, but markets remain cautious as tensions continue.
KPMG said it had revised down its RBA cash rate forecasts and now expects a further three rate cuts this year, one more than its original expectation at the start of 2025, bringing the cash rate down to 3.1 per cent by the end of the year.
It expects the RBA to “look through” any short-term inflationary impact of any oil shock and noted this would be combined with core inflation now looking well entrenched in the target band and overall weakness in the Australian economy.
If the RBA cuts interest rates three times, homeowners could see their repayments drop by $265 a month. That’s based on someone with an average $600,000 loan with 25 years remaining.
Markets have an 86 per cent expectation of an interest rate change at the next RBA meeting in July and are almost fully priced in for three more reductions by the end of the year.
NAB is the only Big Four bank predicting an interest rate cut next month, with ANZ, Commonwealth Bank and Westpac expecting a cut in August.
Westpac chief economist Luci Ellis said the RBA would be more focused on inflation than the oil price.
00:00 Speaker A
I also want to ask about what’s going on with economic data and the Federal Reserve, guys. Um, Ed, what are you hearing there in D.C.? Right? There is now some reporting out there that Kevin Hassett is kind of the front-runner to potentially take Jay Powell’s place at the Federal Reserve. What are you hearing and what’s the kind of vibe in Washington around this decision?
00:43 Ed
So, Julie, the way I’d view this is that President Trump always loves competition. You know, he came to some of his most recent national prominence by having the Apprentice show. And so, my expectation is that President Trump is going to keep multiple people in the running. Kevin Hassett certainly is in there. Kevin Warsh is in there. I’d put Christopher Waller, who’s already on the Fed board, as well as Treasury Secretary Bessant. I’m watching to see if there’s an opening on the Fed. If a governor steps down, like Michael Barr, now that he’s no longer vice chair for supervision, does one of these individuals get onto the board? I’m also watching for Waller as there are rate decisions here in July and September. Is there going to be a dissent? You generally don’t see dissents among Fed governors, but as you’re auditioning for that role, showing that you would be much more dovish is something that President Trump is going to be looking for and could move him up the list of potential Fed chairs come May of next year.
02:26 Speaker A
Yeah, I think the Apprentice Federal Reserve edition is something that no one asked for, uh, guys. I don’t know, Dory, like, in terms of market reaction to all of this, um, you know, we’ve seen rates kind of remain range-bound here as we get numbers like CPI yesterday and PPI today. But do you think at some point that this competition is going to start to really come to bear in the bond market?
03:25 Dory
Uh, yeah, I think we have a showdown coming. Uh, most people in the marketplace want to preserve the independence of the Fed, and when I say that, I mean that both ways, not just from Trump’s standpoint, but from the Fed’s standpoint. I’ve always said the Fed is, in my mind, Powell being a little political in some of his rate cuts early last year. Having said that, the market has always anticipated for the last couple of years anyway, uh, more rate cuts than actually should have happened or did happen. And I think we’re falling into that trap, and so is Trump as well. I’m kind of a wait-and-see kind of guy right now. I do think the next Fed chair is going to be one of those type of interviews, hey, I’m Donald Trump and I believe this, and if you believe this, I’d like to have you as Fed chair. That points to Hassett being the, uh, being, being there. And, uh, I think that’s going to get some criticism from the market. I think we need that independence. We need good independent valuation. Uh, and, and, you know, I think cutting too soon, soon could be, uh, extremely dangerous when we all know that our deficit is out of control, our debt is out of control, and we don’t want to become a Venezuela.
Regional banking company Fulton Financial (NASDAQ:FULT) reported Q2 CY2025 results topping the market’s revenue expectations , but sales fell by 1.9% year on year to $328.4 million. Its GAAP profit of $0.53 per share was 24.7% above analysts’ consensus estimates.
Is now the time to buy Fulton Financial? Find out in our full research report.
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Net Interest Income: $254.9 million vs analyst estimates of $255.1 million (5.5% year-on-year growth, in line)
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Net Interest Margin: 3.5% vs analyst estimates of 3.4% (6.2 basis point beat)
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Revenue: $328.4 million vs analyst estimates of $318 million (1.9% year-on-year decline, 3.3% beat)
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Efficiency Ratio: 57.1% vs analyst estimates of 61% (3.9 percentage point beat)
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EPS (GAAP): $0.53 vs analyst estimates of $0.43 (24.7% beat)
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Market Capitalization: $3.56 billion
“I’m proud that our team has delivered a new company record, with operating net income of $100.6 million, or $0.55 per diluted share, this past quarter,” said Curt Myers, Chairman and CEO of Fulton.
Tracing its roots back to 1882 in the heart of Pennsylvania, Fulton Financial (NASDAQ:FULT) is a financial holding company that provides banking, lending, and wealth management services to consumers and businesses across five Mid-Atlantic states.
In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees.
Over the last five years, Fulton Financial grew its revenue at a solid 8.4% compounded annual growth rate. Its growth beat the average bank company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Fulton Financial’s annualized revenue growth of 8.3% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong.
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, Fulton Financial’s revenue fell by 1.9% year on year to $328.4 million but beat Wall Street’s estimates by 3.3%.
Net interest income made up 76.1% of the company’s total revenue during the last five years, meaning lending operations are Fulton Financial’s largest source of revenue.
First-time buyers are set to see an “instant impact” from the drive to kickstart economic growth, Chancellor Rachel Reeves is expected to say.
More mortgages will be available at more than 4.5 times a buyer’s income following recent Bank of England recommendations that some lenders can offer more high loan-to-income mortgages if they choose to.
This will create up to 36,000 additional mortgages for first-time buyers over the first year, the Government said.
Britain’s biggest building society – Nationwide – announced last week that it is aiming to increase its high loan-to-income lending limit.
From Wednesday, eligible first-time buyers can apply for Nationwide’s Helping Hand mortgage with a £30,000 salary, down from £35,000, and joint applicants with a £50,000 combined salary – down from £55,000.
It is estimated this will support an additional 10,000 first-time buyers each year.
The changes will sit alongside the creation of a permanent mortgage guarantee scheme, delivering on a manifesto commitment, and a review of Financial Conduct Authority (FCA) lending rules that could allow prospective buyers’ records of paying rent on time to be used to show they can afford mortgage repayments.
Reforms will be outlined in Leeds ahead of Ms Reeves’s Mansion House speech on Tuesday evening.
Speaking in the City of London, the Chancellor is expected to say: “I welcome the recent changes the (Bank of England) Financial Policy Committee has announced to the loan-to-income limit on mortgage lending, which the PRA (Prudential Regulation Authority) and FCA are implementing immediately.
“With an instant impact for consumers, such as Nationwide offering its Helping Hand mortgage to more first-time buyers – supporting an additional 10,000 each year.”
Ms Reeves is expected to add: “Today, I have placed financial services at the heart of the Government’s growth mission.
“Recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving.
“And I have been clear on the benefits that that will drive.
“With a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people.”
Nicholas Mendes, mortgage technical manager at broker John Charcol, said: “The decision to widen access to Nationwide’s Helping Hand mortgage by lowering the income thresholds will offer an immediate and practical benefit to a group of people who have often found themselves just on the wrong side of affordability criteria.
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