Stronger US inflation reduces bets of larger rate cut

Just briefly in today’s #5in5withANZ podcast below:

US core inflation is stronger than expected in August causing markets to reduce bets for a 50 basis point cut by the Federal Reserve, the Yen hit its strongest 2024 level against the US dollar, and Australia’s strong labour market continues to surprise the RBA.

5 things to know in 5 minutes:

1. Core US CPI inflation rose 0.3% in August, its fastest rate in four months, and slightly above expectations. ANZ Senior Economist Tom Kenny says the strength reduced bets on a 50 basis point cut by the Federal Reserve later this month from 35% to 15%.
2. Global rates attention turns to the European Central Bank’s policy decision tonight. ANZ Economist Bansi Madhavani says another 25 basis point cut is expected.
3. The Yen traded at its strongest level this year against the US dollar yesterday, following a warning from a Bank of Japan board member that wage growth poses an upside risk to inflation, says ANZ FX Analyst Felix Ryan .
4. RBA Assistant Governor Sarah Hunter yesterday expressed concern that Australia’s labour market is too tight . ANZ Senior Economist Catherine Birch says some jobs indicators haven’t eased as much as the RBA had been expecting.
5. Australia’s labour participation rate is being boosted by a surge of New Zealanders crossing the Tasman. ANZ Economist Henry Russell says New Zealand’s jobs market looks set to keep tightening which could see the outflow continue.

In our bonus Deep Dive interview:

ANZ Chief Economist for Southeast Asia and India Sanjay Mathur reviews the potential impact for businesses of expected rate cuts in Indonesia, the Philippines and South Korea this year.

Cheers

Bernard

PS: Catch you tomorrow with a review of tonight’s ECB rate decision.