Weekly Updates

The FOMC delivered a hawkish fed funds rate cut, lifting the interest rate projection path for the coming years and for the longer run. Other G10 central banks that announced their decisions this week mostly kept their interest rates unchanged. Data-wise, the flash PMIs for December confirmed strong expansion in the US and stagnation or contraction in other major advanced economies.

In Australia, the RBA left its cash rate unchanged, as expected, but issued a relatively dovish post-meeting statement. Data-wise, employment growth surprised to the upside in November, while the unemployment rate unexpectedly fell to 3.9%. Abroad, the annual rate of US CPI inflation picked up slightly in November, as expected, while PPI inflation surprised to the upside.

In Australia, real GDP growth disappointed in Q3, with the annual rate the lowest since the early 90s (outside of COVID-19). Abroad, the US ISM PMIs suggested slower contraction in manufacturing and deceleration in services growth. The Chinese PMIs were mixed, but generally pointed to sluggish growth.

At home, the monthly CPI indicator suggested that annual consumer price inflation remained at 2.1% in October, held down by the impacts of household electricity bill relief measures rolled out by Commonwealth and State governments. Offshore, the FOMC minutes suggested a cautious approach to fed funds rate cuts from now on.

In Australia, the RBA Board minutes supported current market pricing for the first cash rate cut to be in May. The Judo Bank composite PMI fell back into contraction territory in November, as services activity fell for the first time in 10 months. Abroad, US initial jobless claims declined last week to the lowest level since April.

In Australia, wages growth in Q3 slowed more than expected. Employment growth missed expectations in October, while the unemployment rate was unchanged at 4.1%. NAB business conditions remained close to average in October, but business confidence rebounded. Westpac consumer sentiment saw another strong increase in November.