Early Christmas for RBA with landmark inflation print
Christmas came early for data enthusiasts.
Next week the Australian Bureau of Statistics will release the first edition of its highly anticipated comprehensive monthly inflation report, which scientists at the Reserve Bank have long awaited, at least.
The new measure, to be introduced on Wednesday, will be the first time the consumer price index tracks cost increases across the entire Australian economy.
It will give the central bank a more accurate and up-to-date picture of inflation when making decisions on the direction of interest rates.
While the Federal Reserve may be happy to get its hands on the new index, it may not like what it sees.
ANZ senior economist Adelaide Timbrell expects inflation to rise 3.3 per cent year-on-year in October; This is above the Central Bank’s target range of two to three percent but below the 3.5 percent increase recorded in September.
Ms Timbrell said the main drivers of the expected decline would be flat fuel prices, a sharp decline in international holiday prices and small changes in energy bills, which would be offset by re-accelerating increases in rental prices.
He said the central bank’s board was unlikely to give much weight to the October inflation outcome when considering interest rates at its December meeting, unless there was “absolutely significant change”.
The sharp increase in three-month inflation figures strengthened the board’s decision to keep interest rates steady in November.
Central bank governor Michele Bullock warned that it would take several months for seasonal adjustments to be implemented before the bank could fully move away from the quarterly index.
“First of all, long live ABS – very, very happy, I would say,” he said in July, after the bureau said its full monthly gauge was almost ready.
“This will put us on par with most other developed economies.”
The new index will replace the monthly CPI indicator, which was introduced in 2022 to enable earlier reading of inflation.
It covered only two-thirds of the standard basket of goods and services each month and was not reliably used by the Federal Reserve to set interest rates.
Apart from inflation data, it will be a relatively quiet week in the country on the economic front.
On Wednesday the statistics office will publish estimates of how much construction work was done in the September quarter, while updated business investment data will be released on Thursday.
Abroad, the Reserve Bank of New Zealand is expected to cut the cash rate to 2.25 per cent on Wednesday, while investors in the UK will closely watch Chancellor Rachel Reeves’ second budget later the same day.
Both tax rises and spending cuts are on the table as we try to fix the UK’s difficult financial situation.
U.S. stocks rose on Friday on hopes of a December rate cut, but three major indexes fell for the week as investors pulled back from previously buoyant technology companies.
The S&P 500 rose 64.23 points, or 0.98 percent, to 6,603.65 points, while the tech-heavy Nasdaq Composite gained 195.03 points, or 0.88 percent, to 22,273.08 points.
The Dow Jones Industrial Average closed at 46,245.41 points, up 1.08 percent, up 493.15 points.
Australian stock futures rose 92 points, or 1.09 percent, to 8519.
Local markets suffered a fourth consecutive weekly loss on Friday as concerns over stretched valuations faced diminishing chances of a rate cut in the near term.
The benchmark S&P/ASX200 index fell 1.59 per cent, 136.2 points, to 8,416.5 points, while the broader All Ordinaries index fell 147.7 points, or 1.67 per cent, to 8,686.3 points.
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