Fed Cuts, RBA in May, or Maybe Not
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Why did the Fed’s rate cut reveal a deep division among policymakers?
Rate cuts in the US, but a very divided Fed. How do they find their way now? In the dark with very little data. Aussie CPI was a lot higher than expected yesterday, at least a lot higher than the RBA was expecting, and markets are now starting to see things a bit more like nab that the next rate cut will be in May. Or maybe not. Maybe we've reached the end of the easing cycle. And the Bank of Canada cut, the ECB up next as well. It's all central bank. Thanks today. It's Thursday, the thirtieth of October, twenty twenty five. It's the morning call from Nab. Good morning. Well, ten year Treasury yields rose seven basis points, just above four point oh five percent on the Fed cut announcement. Two years are up eight basis points, ten year yields up nine in Canada with their rate announcement.
Aussie ten years rose five basis points yesterday to four point two two percent, another four basis points added to that on futures overnight. The US dollar up a quarter percent, pushed higher by the Fed. The Aussie is up another quarter percent on top Of that at 66 U.S. cents. It got back over 50 pence against the sterling for the first time since February. U.S. equities were on the up. The SP pushed to an all-time high this session, but that optimism disappeared after the Fed and during Powell's press conference.
How did Powell’s press conference shift market expectations for US yields and the dollar?
So the SP now down 0.3%, the Nasdaq down 0.2%, the Russell 2000 is down 0.7%. But before any of that, well, Nvidia's Valuation topped five trillion dollars, the first five trillion dollar c uh company, and it's added a trillion in four months. Wow. That shows you, doesn't it? The race for AI. And here's Nab Sally Ald. So the Fed has cut twenty-five basis points, two dissenters. Uh Steve Moran, fifty basis point cut, is what he wanted. Uh the Kansas Feds uh Jeffrey Smid wanted no move. Uh bond yields have moved up as I said uh on the news. So I tell you, seventy five basis points between the two extremes. That that shows how divided the Fed is, doesn't it?
Yeah, that's right. Good morning, Phil. So I think there's a fair bit of robust discussion going on. Uh clearly not helped by the fact that, you know, they're not getting the usual flow of data. But, you know, I think there's a sense that um and and we heard this in in Powell's press conference that, you know, yes, inflation is elevated. They're taking the view that this is a sort of one off shift in the price level, but they do acknowledge that, you know, the risk is that some of that inflationary behaviour does get Embedded. And at the same time, you know, they've been responding to a story that's really been about a softer labour market. But the tone did shift quite hawkishly in the press conference where Powell basically said, you know, there's no foregone conclusion for December.
What does the surprise Aussie CPI print mean for the RBA’s May rate‑cut outlook?
And so for a market that was basically largely fully priced for the Fed to cut again before the end of the year, clearly there's been a a bit of a a rethink of expectations and that's what's driven, I guess, the most recent push higher in US bond yields and also in the US dollar. Um and he was sort of saying, look, you know, the the labor market's okay. And I think he sort of feels like stuff is happening, but it's happening pretty slowly. And so it doesn't feel like the labor market's uh falling off a cliff. And at the same time, you know, he did acknowledge that some of the the shifts in US trade policy have pushed goods inflation higher. And that's been reflected in in the broader indicator. So I think
You know, he was really sort of trying to tell the market that, you know, we've done a couple of cuts, we're clearly closer to neutral, um, but don't take anything as a foregone conclusion.
Yeah.
Uh from here.
Well even that one cut, I mean, you know, inflation remains elevated. Uh the risk is to the upside, he said in the press conference. Downside risk to employment appears to have risen. It's uh it seems a curious time to cut rates, particularly when you haven't got much data to go on. So uh and yet only one person, uh Schmidt from Kansas Fed, was the only one saying, Well, no, we shouldn't be doing this right now.
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Chapters
8 chapters
1
Why did the Fed’s rate cut reveal a deep division among policymakers?
0:01–1:15
2
How did Powell’s press conference shift market expectations for US yields and the dollar?
1:15–2:38
3
What does the surprise Aussie CPI print mean for the RBA’s May rate‑cut outlook?
2:38–4:31
4
Why are analysts debating whether the easing cycle has already ended?
4:31–6:45
5
How are other central banks (Bank of Canada, ECB, BoJ) responding to today’s data?
6:45–9:07
6
What risks are driving the Bank of Canada’s cautious stance after its rate cut?
9:07–11:11
7
Will the Bank of Japan and the ECB change policy today, or stay on hold?
11:11–13:06
8
Why is Nvidia’s $5 trillion market cap and big‑tech earnings shaping market sentiment?
13:06–14:30