The Fed’s favourite measure of US inflation landed softly in October, leaving it on track to start cutting rates from the middle of next year. But inflation is weakening much faster in Europe, meaning rate cuts could start there from Easter.
In our bonus deep-dive interview, ANZ’s Head of G3 Economics Brian Martin looks at whether market confidence about a soft US economic landing is overdone and whether US elections could upset the apple-cart next year.
5 things to know
Markets consolidated their US soft landing views overnight. The S&P and Nasdaq were mixed. The US 2-year yield rose 6 bps to 4.71%. The 10-year rose 6 bps to 4.33%, bouncing off their lows as traders digested the last month’s price gains.
US PCE (Personal Consumption Expenditure) inflation, the Fed’s preferred measure, was a bit softer in October 3.0% vs a year ago, which was a bit softer than the Fed expected and is reinforcing soft landing hopes, Brian says.
European inflation of 2.4% in November vs a year ago was much weaker than the 2.7% expected. Brian the ECB could start cutting rates as soon as next Easter.
The Bank of Korea held its cash rate at 3.5% yesterday and still has a hawkish bias, albeit with a softer tone, says ANZ Asia Economist Krystal Tan.
New Zealand business confidence surged again in November as a new centre-right Government was confirmed. ANZ New Zealand Senior Economist Miles Workman says firms should be wary of a premature reacceleration that triggers a rate hike.
Bernard
PS: Have a great weekend.
