Australian Bond Exchange Weekly Update
14th February 2025
Key points
- Fed’s Powell Stays Cautious: No Rush for Rate Cuts
- JB Hi-Fi and Car Group See Strong Sales Despite Economic Uncertainty
- Oil’s Losing Streak Continues: Third Weekly Drop Amid Tariff Worries
- European Central Banks at a Crossroads: Easing Cycle on the Horizon?
Global Cash Rates & Inflation
- The Reserve Bank of Australia (RBA) Cash Rate remains at 4.35% per annum, with annual inflation sitting at 3.2% in the year to December.
- The Federal Reserve’s cash rate is currently between 4.25%-4.50% per annum, with annual inflation at 3.0% as of January.
- The Bank of England maintains a 4.75% per annum Bank Rate to manage an inflation rate of 2.5% in the year to December.
- The European Central Bank (ECB) deposit facility rate is 2.75% per annum, with inflation at 2.4% over the same period.
- The Bank of Canada (BoC) recently adjusted rates, bringing its policy rate to 3% per annum, in response to ongoing inflation concerns.
Fed’s Powell Stays Cautious
Federal Reserve Chair Jerome Powell has indicated that the Fed is not in a rush to adjust interest rates. Inflation remains a key consideration, and future rate decisions will depend on economic conditions.
The recent US CPI figures increased more than expected which further underlines the recent comments by the FED Chairman.
Headline consumer prices increased by 3.0% in the twelve months to January, above expectations that the reading would match December’s pace of 2.9%. Month-on-month, the gauge unexpectedly accelerated to 0.5%, up from 0.4% in the prior month and faster than economists’ expectations of 0.3%.
The ‘core’ measure, which excludes volatile elements like food and energy, also rose more than expected, climbing 0.4% on the month and 3.3% on the year, above the expected 0.3% and 3.1%, respectively.
Company earnings surprise on the upside
JB Hi-Fi and Car Group, two of Australia’s leading consumer related companies reported solid revenue growth of close to 10% which highlights once again that the Australian consumer continues to spend despite all the negative impact of the cost-of-living issues.
Highlighting this is the uptick in retail sales and this of course keeps upward pressure on inflation and next week’s much anticipated RBA meeting will provide further insight into the RBA’s thinking.
Oil’s Losing Streak Continues: Prices Decline for Third Consecutive Week
Oil prices have recorded a third consecutive weekly decline, with West Texas Intermediate (WTI) crude falling by 3.2% to around USD 71.13 per barrel. This marks a significant drop from its peak last month. The decline reflects concerns about global demand, exacerbated by ongoing geopolitical tensions.
European Central Banks at a Crossroads
Some major central banks, including the European Central Bank and the Bank of England, have signalled potential shifts in monetary policy as economic growth shows signs of slowing. The timing and extent of any changes remain uncertain.
Europe’s Natural Gas Prices Surge Amid Cold Weather Concerns
Europe’s TTF natural gas benchmark has risen to €59 per MWh ($19.50 per mmBtu) this week, marking the highest continental futures level since February 2023. This increase follows four consecutive weeks of gains in early 2025.
Meteorologists are now warning that average temperatures in Northwest Europe are expected to drop below 0°C next week, the lowest in a year. This is due to Arctic air being trapped over the continent by a shift in the Arctic Oscillation pattern.
Given the expected colder winter, gas consumption across Europe is anticipated to increase by 17% this month compared to the same time last year. EU gas inventories are also depleting at a rapid pace, with levels now at only 48% of capacity.
Additionally, the current weakness of the euro against the US dollar (EUR/USD trading at 1.03) is contributing to the economic effects of rising panic LNG buying. The pace of LNG imports to Europe in February has already been 20% higher than January’s average of 380,000 tonnes per day.
Week Ahead
- Economic conditions remain dynamic
- Central banks to monitor inflation and growth trends
- Focus on inflation data and key economic indicators
*Data accurate as at 14.02.2025
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