Australian Bond Exchange Weekly Update
2nd December 2024
Key points
- Catch up on our latest ABE monthly webinar
- RBNZ cuts again by 50bps
- Australian inflation holds steady
- More Federal Reserve cuts on the way – FOMC minutes
Global Cash Rates & Inflation
● The Reserve Bank of Australia (RBA) Cash Rate now sits at 4.35%pa and the annual inflation rate in the year to September is 2.8%.
● The US cash rate (policy rate) is currently between 4.50%-4.75pa and the annual inflation rate in the year to October is 2.6%.
● The Bank of England Bank Rate currently sits at 4.75%pa to fight an inflation rate of 2.3% in the year to October.
● The European Central Bank Cash Rate (deposit facility) is 3.25%pa, to fight an annual inflation rate of 2% in the year to October.
Catch up on the latest ABE Monthly Webinar
Watch the latest edition of our ABE Monthly Webinar where speak with co-founder Markus Mueller, and special guest Tim Kaighin, a veteran resources industry professional with over 20 years’ experience.
We delve into the latest economic developments and uncover exciting opportunities in the resources sector as Tim shares his expert insights. With banks retreating from the space, new and exciting opportunities are emerging—Tim reveals where just some of the potential lies.
RBNZ Cuts Again by 50 bps
On Wednesday, New Zealand’s central bank lowered interest rates for the third time in four months and indicated the possibility of further significant cuts, including a likely half-percentage point reduction in February.
While the Reserve Bank of Australia (RBA) is not expected to implement a rate cut until early next year—if not later—the Reserve Bank of New Zealand’s (RBNZ) recent rate cut reinforces the prevailing sentiment that the next significant move in monetary policy is likely to be a reduction.
As such, investors hiding in cash and cash equivalents must consider whether their current strategy is suitable as the monetary easing cycle commences.
Australian Inflation Holds Steady
Australian consumer price index inflation grew less than expected in October as government subsidies helped lower energy expenses, although core inflation rose further above the Reserve Bank’s target range.
Temporary household subsidies, including the $300 energy bill rebate, have significantly contributed to downward pressure on inflation, but the RBA expects the headline measure to jump back to 3.7% late next year when they expire.
More Federal Reserve cuts on the way – FOMC minutes
Federal Reserve meeting minutes released this week reveal that the U.S. central bank is poised to make further cuts to the federal funds rate, assuming that inflation continues to trend lower as expected.
“In discussing the outlook for monetary policy, participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time.”
The minutes come as the latest core personal consumption expenditures (PCE) – the Fed’s preferred measure of inflation – increased 2.8% from October last year.
It should also be noted that Donald Trump’s economic agenda, including the imposition of tariffs, could influence the Federal Reserve’s decision-making process.
As such, the central bank may need to factor in potential disruptions to trade and global supply chains, which could affect inflation, growth, and employment.
Week Ahead
- FOMC minutes
- Australian monthly CPI data
- U.S. PCE inflation data
- Australian retail sales
*Data accurate as at 02.12.2024
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