Solid US inflation means the Federal Reserve could pause rate cuts in December. The Reserve Bank of New Zealand cuts 50 basis points, with questions arising over its next move, and underlying inflation ticks up in Australia.
In our bonus deep dive interview, after yesterday’s RBNZ decision, ANZ New Zealand Chief Economist Sharon Zollner sums up the state of play for Kiwi interest rates, with the next RBNZ move not happening until February.
5 things to know:
The Fed’s preferred PCE inflation measure rose 0.2% in October and 2.3% for the year, in line with expectations. Core PCE rose 0.3% in the month and 2.8% annually. That was ahead of the FOMC’s forecast that core inflation would end the year at 2.6%. ANZ Head of G3 Economics Brian Martin says an underlying disinflation trend remains intact, although a pause in December remains possible.
The Reserve Bank of New Zealand cut rates as expected by 50 basis points to 4.25% yesterday. But as ANZ New Zealand Chief Economist Sharon Zollner explains, the move wasn’t all smooth, with exchange rate and interest rate volatility on the day as the market picked through differences between new forecasts and comments from the Governor.
Australia’s headline CPI inflation held steady at 2.1% in October, below market expectations for a rise to 2.3%. ANZ Senior Economist Catherine Birch says this masked a 30 basis point rise in underlying prices to a three-month high of 3.5%, when temporary Government cost-of-living support is stripped out.
Catherine says, though, that the trend in trimmed mean inflation is still downwards - something the Reserve Bank of Australia will have been looking for.
Construction activity in Australia over the third quarter made a stronger-than-expected rise of 1.6% from Q2, four times the market expectation for 0.4%. ANZ Senior Economist Adelaide Timbrell says Q2 growth was also revised up considerably, from 0.1% to 1.1%.
Cheers
Bernard
PS: Catch you tomorrow with analysis of today’s rate decision by the Bank of Korea, and the latest ANZ Business Outlook results.
