RBA back on the narrow path

0:00Well the RBA did lift rates but will they do it again? Michelle Bullock has been interpreted as being a little bit more dubbish than expected. Maybe she is back on that narrow path of balancing inflation against jobs and growth. Meanwhile everywhere inflation expectations rise, bond yields rise, consumer confidence is not very confident to stall and we get Australian inflation numbers today. It's Wednesday, it's the 30th of September 2026. It's the morning call from now. Good morning. Well the US dollar has been up and down a bit overnight but it's up 0.2% overall. The Aussie has lost half a percent though. It's actually below 70 US cents now for the first time in a while. The euro is down 0.3%. US equities are lower. About 0.2% lower for the S&P and the Nasdaq down 0.4% for the DAB. In Europe the euro stocks 50 is up 0.3% but the FTSE 100 is down half a percent and 10 year treasuries are up another three basis points up to 5.26% and a mixed picture for Europe down in Germany and the UK but 10

1:00year yields are up for basis points in France and Aussie 10 years will they fail four basis points yesterday to 5.37% overnight though. They've added a few back up to 5.4% on futures and oil today. Well it's down for today. 2.6% lower for Brent. Still about 102.6 though. WTI is 3.6% lower and an ABS Taylor New Zealand is with us today bright and early on the day after the RBA so they lifted their interest rates by 25 basis points. Who's expecting that Taylor? Apart from everyone. Michelle Bullock was sounding a bit more hawkish, more dubious I should say. The language from here that this idea that they were fighting inflation at all costs, who is expected of the job market, well she seemed to suggest otherwise yesterday didn't she? Yeah good morning Phil so yeah no big surprises out of the decision plus 25 basis points to 4.6% as widely expected. It was a unanimous decision so the vote was 9.0 and the post meeting statement. It didn't really add too much new relative to what we've heard

2:04from that drum beat of RBA communication recently. Most of the action was on the inflation side, recent inflation data was stronger than they'd expected. What's happening with energy prices relative to their August assumption is you know at more elevated than they'd earlier expected and so both kind of the recent data was saying inflation was a bit stronger and some of those upside risk to inflation and the outlook. They said materialising and so that's well justified the decision to increase interest rates in terms of the growth characterization. Less exciting it was they said it was marginally stronger than expectations but had slowed from last year. The Latin market characterization they certainly weren't spooked by that jump in the unemployment rate in August. Their assessment was that the Latin market was broadening. Was loosening as expected and remained a little tight and they pointed to forward looking indicators being reasonably stable there as well. So nothing that was particularly worrying for them on the growth and Latin market side at this stage and then those challenges on inflation and so the

3:06case to increase interest rates is pretty clear and then it was really only during government books press conference that we saw that kind of that kind of performance in the Aussie comes through and a bit of a pull back in in three years in Australia as well down around kind of on five basis points or so. Is that because the belief now is you're back on treading this narrow path about trying to get inflation tame but without causing too much damage to jobs and the economy because I mean there was this expectation wasn't that they were almost certainly going to rise again but a question mark over that now. Yeah that's right and so I think you know nothing no huge shift here. Certainly our view is unchanged out of this kind of that base case is that they will be on hold from here but the rest still very much skewed towards a follow-up increase at that that November meeting and that kind of didn't really shift but I think relative to say that that kind of 90 vote that we got it at 230 there are a couple of comments from Bullock that just kind of took the what would have otherwise been a bit of a hawk issue off that she noted that the board

4:07discussed a hold versus a hike and they decided to hike noted that policy was restrictive and kind of mentioned there that kind of the hope is that the kind of for increases that we've seen this this year would be enough and so all of those comments you know maybe just kind of suggesting that the RBA is kind of you know strategy of you know trying to get away with doing the the bare minimum if you like is is still kind of there in the background and it's certainly not not a done deal that they'll kind of you know take out a bit more insurance and tighten more aggressively into the inflation challenge. But they won't do that of course if they see that jobs are disappearing and the economy is slowing is that going to happen? Well certainly our expectation is that kind of growth will remain below trend and is probably cooling a little bit further the labor market you know we did get that bounce higher in August there's a you know decent chance that that will be at you know at least stable maybe even retrace a little bit because of some of those issues around seasonal adjustment I've talked about before and in the next print but those kind of broader themes in Australia are that kind of growth has slowed from where it was last year

5:08and we think it will continue to slow and we expect that the trend of the labor market over the next kind of you know few quarters is is towards a little bit further easing and so again that is kind of a little bit of a different starting point than what you know say the the FOMC is facing at the moment so the RBA we're watching that closely a couple of hours before the RBA decision we get did get the August ABS spending data as well and this is it's volatile it's not necessarily the the clearest guide to consumer spending but for what it's worth it was certainly consistent with that story that some of the resilience that we've seen in in household spending you know is kind of fading at the margin and consistent with a bit of further slowing and that was kind of that that discretionary side that that is more notably in all their staff to some resilience recently even as kind of big jump in fuel supported the overall number because of those comments from Michelle Bollock we did see Bon Yields down quite a bit Aussie Bon Yields down a little bit yesterday but they plan back up again overnight I guess because the general direction in the world is up yeah yeah so a bit of kind of

6:11our performance in in kind of the you know the front end of the Aussie curve certainly I will say there that kind of that kind of that kind of very near term pricing kind of you know what it's expected from from the RBA by the end of the year that's reasonably little changed although we did see some of that kind of terminal pricing come off six basis points or so next year and I think if we to think about the kind of that global backdrop you know there was kind of a pushire in in global yields very much led by the long end though and so it was a theme of kind of steeper curves especially in the US and in and the US kind of you know leading a little bit more stability in kind of the UK and Germany but some unperformance in in France and Italy as well out in the long end that was all until a couple of hours ago as as we're speaking at the moment the feds Williams had some commentary that was taken as as rubbish and that's so the two year yields fall around five basis points also in the US and you know added even further to that that kind

7:13of you know steepening theme in the moves over now yeah because 30 year treasure yields got the highest level since 2002 I mean these are you know quite staggering some of the figures because if you look at Europe where they they so they had guild auction yesterday 10 years when last time they each 5.2% yield to 5.2% that that's risen to 5.4% this time Italy last time 4.1% this time 4.6% these are big moves aren't they yeah yeah so I mean certainly if we take a kind of a broad of you and and look over the month of September these are kind of you know very big moves and we just saw that kind of you know that that arise in in longer end yields globally continuing to to be a theme overnight and I think that's interesting because that was even despite a bit of a fallback in in oil prices that we saw over over the past 24 hours yeah well those oil prices are falling because no there's no bad news there's no good news there's no bad news so I guess the general tendency is down unless there's something to push it back up again but it's still high obviously so because we've seen this strengthening in in US yields I guess that's what's

8:16pushed the US dollar and and that's taken the Aussie dollar down below 70 yeah and we also had obviously that kind of the the market reaction to to the RBA certainly contributed to a little bit of that Aussie underperformance as well and it means it is bet below 70 as we said so jobs the job openings well maybe a slight sign of weakness not huge though I mean basically what was it 7.1 million jobs opening in August when it was 7.25 that was expected a minute vision to the to the July number no big moves though yeah not huge there's not much market reaction the kind of you know that shift that we got in near-term Fed expectations you know compared to yesterday we've got a hike at the next meeting closer to 50% priced from 70% price previously that was really on on those Williams comments rather than the data flow that that came out earlier but yeah in terms of the data in particular openings lower than than expected but that had been interesting the openings measures from Joltz had been a bit stronger than some alternate job advertising indicators in the US so maybe there's just a little bit of a

9:21correction down to what those other indicators had been suggesting but you know certainly not not can not not in line with that theme of kind of you know potential strengthening in the US data this this latest release elsewhere in the survey quid rates was steady at 1.9% the layoff rate fell from fell to 1% from from 1.1% so that kind of you know low fire environment still very much still indicated by by that survey as well even as openings did fall and interestingly we got consumer confidence as well and so confidence fell quite starkly but also in that survey is that this is the the measure from the conference board and that ratio of people saying that jobs are plentiful versus hard to get that slipped as well and it's now a new post-pandemic low so you know certainly at the margins and softer updates on the labor market overnight as we look towards payrolls at the end of the year 23.6% said jobs were plentiful which was down from 24.5% and 21.9% said jobs were hard to get which is up from 20.3% so it's sort of moved in in both directions but

10:24the that that conference board consumer said I haven't looked to see this quite partisan I haven't had a chance to look and see what the difference is based on voters but I mean the fall is where we are now and where we're going the expectations and current conditions both fell although interestingly the current conditions fell more than the expectations so people are saying so still a bit of opticy could read that and say well okay there's a bit of optimism there because people are saying well things are bad now they're not going to be quite as bad going forwards was my read on that yeah I think that's fair and that's been a theme in that survey for a while so the overalls it was it was a bit weaker than than expected it did fall as you say the current conditions and that forward looking component both fell but you know they're they're kind of exceptionally weak levels relative to history that's really driven by that current expectations component the forward looking component doesn't look quite as dire although it did fall to a 17 month low so it's certainly you know at pretty soft levels and I suppose you know that's perhaps shouldn't be that surprising given what's happening with with fuel prices recently as well yeah and the mid-temp's

11:28given that partisan nature of those questions so and Canada just over the border their economy not racing ahead of tall in the GDP numbers we got yesterday a flat July and then just what was a very very slight growth in August yeah that's right the preliminary August number at 0.2% flat for July and that was reasonably close to expectations it says that the GDP data in in Canada through the third quarter is likely to get slower than than what was seen through Q2 but I don't think those numbers are particularly different to what the Bank of Canada had been penciling in so we didn't see much shift in in expectations for the Bank of Canada on that one still about 50% price for a move at the next meeting and European consumer confidence numbers we got those yesterday they're not good but not getting much worse and we get the see we start to get the CPI numbers we get a few more today we did get Spain where inflation is rising 4.9% Italian producer prices 10.9% year on year and do the energy cost my other bit to do with that

12:28so it's going to be interesting to see what the CPI numbers from Europe are today so we got a couple more countries today that's right yes they France and Germany today ahead of the eurozone wide numbers on on Friday and you know Spain was overnight and we saw that the headline numbers kind of creeping higher that'll be expected in in the numbers overnight and in the eurozone wide number on on Friday as well in terms of that that confidence story you know we did say consumer confidence A's and A's more than than expected and so some of those kind of you know headwinds from from higher prices likely flowing through there as well but kind of also in those European commission numbers with some updates on kind of you know the business side and we certainly we did see the weakness very much led by consumer expectations and so there was actually a little bit of an improvement in in some of the kind of you know the business focus confidence measures as well in in in Europe and Andy Burnham who is the currently the UK Prime Minister for those keeping people keeping up on that sort of stuff he gave his speech at the Labour Party conference couple of big things that came out of that one is he said he wanted to abolish the

13:30triple lock on pension so the moment the pension increase the state pension increases whichever is the greater of two and a half percent wage growth or CPI and he wants to abolish that commitment so he can spend more money elsewhere he also wants to abolish the first pass the post voting system so electoral reform as well so two quite big hitting moves um I'd mark a reaction yeah that that's right so you know a couple of big changes there I think you know we didn't see a particularly large marker reaction um and I think you know some of that just speaks to that you know all those awesome um fairly large reforms that are being proposed that kind of they're the bit of a forward start on on those the kind of um and so they're a bit out in the future um you know both of those um a plan to be kind of taken to the next election and could start from from 2030 so um that kind of you know focus on or would there be kind of meaningful measures that could affect kind of the path of spending in in the short term not much new one on that front today or yesterday when we heard all the prior day when we heard from the chance so preferences and compulsory voting Andy could give that a try and I wonder if there's a place in the world where that uh we

14:33could have a look and see whether that works or not uh Aussie CPI uh today it's also USPCE data there as well so uh it's in inflation day today is the focus yeah that's right pretty busy week and continues so for um CPI in in Australia this is the numbers for august um we expect headlines to bounce higher from 3.5% in July back up to to 4.1% in august that's in line with consensus and really what's happening with with fuel prices is is the big story playing through in the headline number on the kind of trim mean measure the monthly outcome we expect to point 3% month on month which would be a bit of a slowdown from that exceptionally strong uh July number um but certainly still elevated and and too high for the RBA's comfort um where at 3.7% year on year that's you know pretty close to consensus if maybe maybe a they're so slightly higher um and all of those numbers you know on our numbers uh that's tracking broadly in line with a 1% quarter on quarter for the RBA's preferred uh trim mean measure at this stage we'd see the risk maybe tilted even even higher

15:37than that so you can certainly that kind of that um bad news in the realised inflation uh numbers recently in Australia that the RBA has noted we expect that to be largely confirmed in in the numbers today and we'll be assessing how that flows through over in the US overnight the core PCA numbers especially we point 3% month on month in in august so again that's that's too elevated for the comfort but not necessarily new news um there's also some revisions to the PCA methodology which could take a 10th or two off the the year ended numbers there that are worth watching out for and also in that survey it's expected to kind of confirm that strength in in household spending that where there has been hinted at by the US data recently with consumer spending in august expected to be up 0.8% yeah okay and China's PMIs today as well so where once again that whole has a domestic economy doing versus the the export economy uh that seems to be an ongoing story doesn't it and then the ANZ New Zealand business outlook survey as well today so a bit going on but we yeah we're out of time uh we'll we'll see again soon Taylor thanks Phil and that's the

16:41morning call for this Wednesday morning sun already up I do like this time of the year it's a lot easy to get up early that's it for me I'm Phil Dobby for now I'll see you again tomorrow morning