Australia CPI slowed to 0.5% qoq in Q3, down from Q2’s 0.6% qoq, but matched expectations. Annually, CPI rose to 1.7% yoy, up fro 1.6% yoy and matched expectations. RBA trimmed mean CPI rose 0.4% qoq, 1.6% yoy, matched expectations.
ABS Chief Economist, Bruce Hockman said: “Annual inflation remains subdued partly due to price rises for housing related expenses remaining low, and in some cases falling in annual terms. Prices for utilities (-0.3 per cent) and new dwelling purchase by owner-occupiers (-0.1 per cent) both fell slightly through the year to the September 2019 quarter, while rents (0.4 per cent) recorded only a small rise”.
Westpac said that there was some AUD depreciation pass-through to inflation but there is no broader impact of wider inflationary pulse. There is little pressure on the RBA to cut again this year. And Westpac maintains the forecast of another cut in February 2020.
BoC expected to stand pat, Fed expected to cut
USD/CAD recovers mildly ahead of 1.3016 today, as markets await BoC and FOMC rate decisions. BoC is widely expected to keep policy rate unchanged at 1.75%. Upside surprise in GDP growth and solid inflation offered BoC much room to stand on the sideline. Additionally, the newly-elected government’s fiscal stimulus is expected to support the economy in the coming year. There is no imminent need for the central bank to act in either direction. Ongoing trade war uncertainty and global economic slowdown would be the main focuses of policy makers ahead, and that could determine whether BoC needs to do anything next year.
On the other hand, markets are generally expecting Fed to cut interest rate again by -25bps to 1.50-1.75% today. Fed fund futures are pricing in 97.8% chance for that. The main question is whether chair Jerome Powell will signal that it’s the end of the so called “mid-cycle adjustment”. Such message could also be reflected in changes in the forward guidance too. There is prospect of a Dollar rebound should Fed affirm this message.
Here are some suggested readings on Fed and BoC: