Chapter 1: What is the main topic discussed in this episode?
A listener production.
The Aussie market receives a healthy boost from today's softer inflation numbers.
And what does this mean for interest rates here in Australia?
Good afternoon, I'm Steve Daglian.
I'm Laura Bessarati.
It's Wednesday the 27th of May. Welcome to the CommSec Market Update.
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Chapter 2: How did the Australian share market respond to inflation data?
Well, the good news is, Stevie, we've bounced off the lows that we were at earlier on in the session. So we started the day off in negative territory. Not by much, though. It was quite a cautious start to the day.
Chapter 3: What impact does softer inflation data have on interest rates?
I think investors were really waiting for this key inflation data. And it finally dropped at 11.30am. And from there, we got quite the boost because it was much softer than expected for the headline number.
Absolutely. And it's a reason why we went from being down around a quarter of a percent just before the figures were handed down to now being up around half a percent. So we're basically up near the best levels of the sessions as well. As you pointed out, it was certainly the headline numbers which came in quite a bit below what the market was expecting. That seemed to
give the market something to cheer, I guess. Keep in mind that it went from 4.6% annual pace over the year to March to 4.2%. So that was well below the 4.4% that the market was anticipating. One of the reasons for this was the temporary three-month reduction in the fuel excise, which kicked in at the start of April. So basically, this brought down petrol prices. That was certainly helpful.
But of course, the trim mean number is another figure that receives a lot of attention, especially by economists, by people in markets and by the Reserve Bank, because this kind of strips out some of those moves at the extremes and gives us a clearer idea of what inflation is looking like. That largely came in line with what the market was expecting. It went from 3.3% a month earlier to 3.4%.
So still well above what the RBA wants to see at around two and a half. But the good news was that it was smack bang in line with what pretty much the market was anticipating.
Yeah, absolutely. So we had softer jobs data last week. Today we've had that softer inflation data. We've already had three rate hikes so far this year. So what this all means is that we'll likely see the RBA sit on their hands at their meeting. in about three weeks' time in around mid-June. So market pricing has gone down even further.
So there was about a 4% chance that they could potentially hike. That's now sitting at a 0% chance that they might hike at their next meeting. That's really given the board some space to see how things develop. They used that word quite a lot in their last press conference when they did hand down that third rate hike. And domestically, economic data seems to be moving in the right direction.
So that is all Good news, considering that it could see them sit on their hands for a little while longer. But remember, the war is still not over. That essential passageway, the Strait of Hormuz, it remains effectively shut. There's no oil passing through and global inflation risks are still very much alive.
For now, things are looking okay, but the chance that inflation does start to ramp up again in the coming months is certainly something to be mindful of. So we're not completely out of the woods yet as those higher prices slowly feed through to consumers. So that is something to be cautious about going forward, but looks like no rate hike in June at this stage.
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