Inflation readout make or break for 2024 rate cut

[Pelican Press 0]

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Inflation readout make or break for 2024 rate cut

Much hinges on inflation figures out this week as patience for interest-rate relief wears thin.

Stretched mortgage-holders and a Labor government heading into a federal election will be hoping for a weaker set of numbers that could pave the way for interest rate cuts sooner rather than later.

Heartening progress is expected in Wednesday’s September quarter consumer price index though ANZ economists say a result weak enough to convince the Reserve Bank of Australia to start easing rates this year is unlikely.

While the headline figure may fall inside the central bank’s two-three per cent target band, focus will be on the trimmed mean.

That’s a measure of inflation that strips away volatile price moves, including temporary state and federal energy rebates the RBA plans to look through.

The key measure of underlying price pressures should hang on at 0.8 per cent, the same result as the quarter before.

On an annual basis, ANZ was predicting trimmed mean inflation of 3.5 per cent, down from 3.9 per cent in the June quarter.

ANZ head of *********** Economics Adam Boyton and his colleagues said the lower annual rate of trimmed mean inflation would be welcomed but was unlikely to prompt the central bank to start cutting rates at either of the two remaining board meetings in 2024.

The bank, which is tipping a February 2025 start to cuts, said risks of a hotter or cooler trimmed mean than forecast were in balance.

Commonwealth Bank economists believe inflation will come in weaker and open the door for the first 25-basis-point cut in December.

Yet if the trimmed mean comes in any stronger than its quarterly forecast of 0.7 per cent, CBA head of *********** economics Gareth Aird said the bank would “jettison our call for a rate cut this calendar year.”

Ahead of the next cash rate meeting on Melbourne Cup day, Mr Aird said there would be other data sources for the RBA board to digest.

That included September retail sales from the *********** Bureau of Statistics on Thursday and the monthly household spending indicator on Friday.

The two publications would provide the clearest signals yet on whether consumers are spending or saving their tax cuts.

“Our expectation is that the consumer response has so far been muted,” Mr Aird said.

Other data from the bureau scheduled over the week includes building approvals numbers on Thursday and lending indicators on Friday.

In the US the Nasdaq ended higher on Friday, driven by megacap shares, as investors awaited quarterly results from some of Wall Street’s biggest companies next week.

The Dow Jones Industrial Average fell 259.96 points, or 0.61 per cent, to 42,114.40, the S&P 500 lost 1.74 points, or 0.03 per cent, to 5,808.12 and the Nasdaq Composite gained 103.12 points, or 0.56 per cent, to 18,518.61.

*********** futures fell two points, or 0.02 per cent, to 8237.000.

On Friday the *********** share market’s morning gains mostly faded in afternoon trading, with the bourse snapping its two-week winning streak.

The benchmark S&P/ASX200 index had been up by as much as half a per cent about midday but ultimately closed just five points higher at 8,211.3 – a gain of 0.06 per cent.

The index dropped 0.87 per cent for the week and is down 0.71 per cent so far in October.

The broader All Ordinaries closed Friday up 13.4 points, or 0.16 per cent, to 8,467.3.

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