ABE Weekly – Consumers finally cut back on spending

Australian Bond Exchange Weekly Newsletter

Friday 27 January 2023

ABE Weekly 27 January 23 PDF version

Key Points

• Inflation hits 7.8 per cent (Australia)
• The Fed funds rate stands at 4.33 per cent (US)
• The Euro zone annual inflation was 9.2 per cent (Euro)
• The CPI rose by 9.2 per cent in the 12 months to December 2022 (UK). 

Australia

The high inflation registered recently has raised concern about the possibility of the Reserve Bank of Australia (RBA) lifting interest rates again to stop the rising costs of living (1). The RBA has lifted the cash rate by 3 percentage points since May 2022, in what has been the fastest tightening in a generation (2). 

It seems like consumers are finally cutting back on spending, as inflation hits 7.8 per cent (3) over the twelve months to the December 2022 quarter. According to the Australian Bureau of Statistics (ABS)the increase was driven by Domestic holiday travel and accommodation (+13.3 per cent), electricity (+8.6 per cent), international holiday travel and accommodation (+7.6%) and new homes (+1.7%). 

Global Markets

US Markets

The Fed funds rate stands at 4.33 per cent (4) as of 26 January 2023. Meanwhile, the Consumer Prices Index (CPI) for all items fell 0.1 per cent (5) in December as gasoline decreased. 

European Union 

The Euro zone annual inflation was 9.2 per cent (6) in December 2022 down from 10.1 per cent(7) in November 2022. Meanwhile the interest rates in effect from 21 December 2022 stand at 2.50 per cent. 

United Kingdom

The CPI rose by 9.2 per cent (8) in the 12 months to December 2022, down from 9.3 per cent in November; while interest rates in the United Kingdom were raised to 3.5 per cent during the December meeting, making borrowing costs the highest they have been since 2008(9).

References​

Australian Bureau of Statistics. (2023, 01 25). Consumer Price Index, Australia. Australia. Retrieved from https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release

Eurostat Statistics Explained. (n.d.). Inflation in the euro area. Retrieved from https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Inflation_in_the_euro_area#:~:text=Euro%20area%20annual%20inflation%20was,from%2010.1%20%25%20in%20November%202022.&text=The%20%EF%AC%81gures%20presented%20in%20this,of%20Consumer%20Prices

Financial Review. (2023, January 25). Surprise inflation to force Australia, NZ to lift rates. Retrieved from https://www.afr.com/markets/debt-markets/shock-inflation-will-force-australia-nz-central-banks-to-lift-rates-20230125-p5cfb3

Office for National Statistics. (n.d.). Inflation and price indices. Retrieved from https://www.ons.gov.uk/economy/inflationandpriceindices#:~:text=Consumer%20price%20inflation%2C%20UK%3A%20December%202022&text=The%20Consumer%20Prices%20Index%20including,down%20from%209.3%25%20in%20November.

The Guardian. (2023, January 25). Australia’s softening inflation unlikely to spell an end to interest rate hikes. Australia. Retrieved from https://www.theguardian.com/australia-news/2023/jan/25/australias-softening-inflation-unlikely-to-spell-an-end-to-interest-rate-hikes

Trading Economics. (2023, January 25). United States Fed Funds Rate. Retrieved from https://tradingeconomics.com/united-states/interest-rate#:~:text=interest%2Drate%20decisions.-,The%20Federal%20Reserve%20raised%20the%20fed%20funds%20rate%20by%2050bps,in%20line%20with%20market%20expectations.

Trading Economics. (n.d.). United Kingdom Interest Rate. Retrieved from https://tradingeconomics.com/united-kingdom/interest-rate#:~:text=Interest%20Rate%20in%20the%20United%20Kingdom%20is%20expected%20to%20be,macro%20models%20and%20analysts%20expectations.&text=In%20the%20United%20Kingdom%2C%20benchmark,Monetary%20Policy%20C

U.S. Bureau of Labor Statistics. (2023, January 25). Retrieved from https://www.bls.gov/cpi/