Get ready for rate hikes in early 2026
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What is NAB's new rate call for early 2026?
A new recall from NAB. The RBA will move rates higher sooner than you might have liked. That is the belief. No surprise then that the consumer confidence numbers have fallen a bit in Australia. Non-farm payrolls in the US, we did get two months worth, and the unemployment rate has ticked up a little. Does that help the case for more cuts? And amongst the mixed reports in the PMIs, the UK coming out better than expected. That's a surprise. It's Wednesday, it's the 17th. of december twenty twenty five, it's the morning call from NAB. Good morning. Well, the US dollar is lower again, losing another quarter percent on the DXY actually down to ninety-eight now, which is the lowest it's been since October. The Aussie, though, also down slightly.
The pound is up naught point four percent, so is the Japanese yen. Two countries about to move interest rates, albeit in opposite directions. Uh US shares continue their slide, another quarter percent off the NASDAQ, not point three percent off the SP, and in Europe, not point six percent off the FTSE one hundred and the down. Small moves in bond yields, uh oil falling even lower, down 2.3% for WTI and Brent. Brent is now well below 60. WTI is almost down to 55. In fact, it got below 55 mid-session, which is new multi-year low. So a few records being broken overnight. Here's Nab's Taylor Nugent.
Why have Australian consumer confidence numbers fallen?
Uh let's start though, Taylor, before we get into all of that. Nab's rate call now, February, is on the cards. For a hike from the RBA.
Yeah, good good morning, Phil. That's that's right. I'm sure reg regular listeners will will be aware that we've been kind of seeing the risks shifting around around the RBA and the kind of the balance of risks in in the outlook given how the data flow has been coming in for the last few months. Um and so, you know, we've now formally chang changed our our view, re realising some of those upside risks to um to the the previous rate track, and so we now see a twenty five basis point hike in February and a follow-up 25 basis point hike in in May, so 50 basis points of of tightening over the first half of 2026.
And you know, the the expectation there is by kind of the RBA acting early and and you know they should be able to still manage this cycle while keeping keeping growth close to trend and and the labour market intact. Um but you know we do think that the data is coming in a way that means that, you know, they probably do need to, you know, tap the brakes a little bit as as we move into into twenty twenty six. And, you know, we know what those themes are. It's a starting point where growth is already picked up to around trend, private demand outpacing the RBA's forecasts and um inflation that is too strong. So we saw that in the the third quarter CPI and and our read of the the data we've got since then the October um CPI is that you know the the upside inflation surprise is probably a bit bigger and a bit more broad based than was evident in that third quarter CPI.
So a small upside surprise expected again to the RBA's uh November forecast for Q four trimming.
No surprise then, is it, that the uh consumer confidence number that we got l like yesterday in the latest Westpac survey uh saw that confidence fell a little bit. I mean, that'll be a large part of it. I would have thought would have been this uh this expectation that interest rates aren't going down and now we're saying, Well, actually they're gonna go up.
Yeah, potentially. I think we've got a view that, you know, quite large monthly fall in in consumer confidence in the the context of a um a pretty inexplicable uh jump in the in the prior month as as well. So certainly it has been um quite a lot of volatility over the past couple of months and so you know in in a trend sense consumer confidence it's a little below its its um you know at that that kind of balanced uh level, uh but it's certainly held on to, you know, most of its game.
How did the October and November US non‑farm payrolls impact rate expectations?
gains, almost all of its gains, um the improvement that we saw from kind of those softer early twenty twenty four levels.
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Chapters
7 chapters
1
What is NAB's new rate call for early 2026?
0:01–1:15
2
Why have Australian consumer confidence numbers fallen?
1:15–3:39
3
How did the October and November US non‑farm payrolls impact rate expectations?
3:39–5:35
4
Why is the UK the only region showing improvement in services and manufacturing PMIs?
5:35–9:36
5
What are the details of the RBA's planned 25‑basis‑point hikes in February and May 2026?
9:36–11:48
6
What does the rise in US unemployment to 4.6% indicate for the labour market?
11:48–13:49
7
Will the Bank of England cut rates this week despite sticky services inflation?
13:49–14:58