Australia’s inflation rate was much weaker than expected in October, but the RBA is expected to stay on a hawkish hold. The Reserve Bank of New Zealand has also taken a hawkish stance, wrong-footing markets hoping for early rate cuts.
In our bonus deep-dive interview, ANZ’s Head of G3 Economics Brian Martin examines growing market confidence about a soft US economic landing.
5 things to know
The US 2-year Treasury yield fell another 7 bps to 4.66% and the 10-year fell 4 bps to 4.28% on stronger convictions about a soft landing. The NZ$ is firm at 61.52 USc at 5am Sydney/Melbourne time. The A$ is off its highs at 66.21 USc.
Australia’s annual inflation rate slumped unexpectedly to 4.9% in October from 5.6% in September. ANZ Australia Senior Economist Catherine Birch explains why it wasn’t quite so soft beneath the surface.
Catherine says the RBA is still worried about services inflation, but will need to see more data to be sure inflation is so strong there needs to be another hike.
The RBNZ held its cash rate at 5.5% as expected, but it was much more hawkish than expected in its comments and forecasts, says ANZ NZ’s Senior Strategist David Croy.
Some in markets think the RBNZ is just sabre-rattling, but David says the central bank appears genuinely worried sticky inflation may force another rate hike.
Cheers
Bernard
PS: Look out tomorrow for part two of Brian’s deep dive interview. He looks at whether political uncertainty could pull the cushion out from under the US economy.
