Help is on its way
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How does softer US inflation keep the prospect of further rate cuts alive?
Softer inflation keeps the chances of further rate cuts open in the United States. That's without President Trump branch stacking the Fed. His attempts at trying to do that have had zero impact so far. The New Zealand economy is on the road to recovery. We'll look at what the RBNZ has to do, if anything now. An election in Japan seems more likely. Big market moves there. And is action into Iran now looking more likely? Help is On its way, President Trump posted on Truth Social. It's Wednesdays, the 14th of January 2025. It's the morning call from NAB. Good morning. Well the US dollar is up a little, the Aussie is down naught point four percent to sixty six point eight US cents. A mixed story for equities, uh the Nasdaq up a bit, the S P down a bit, the Eurostocks fifty uh climbing a quarter percent, ten year treasury yields are down just one basis point, yields are up one or two basis points across Europe.
Aussie ten years finished at four point seven percent yesterday, up to four point seven five percent overnight though. And oil is up more than two and a quarter percent and And silver is up another four and a quarter percent to a new record high. Gold hitting another fresh high as well. And it's Nabs Taylor Nugent uh out of bed early this morning. So let's start with US CPI. So inflation has cool cooled a bit, hasn't it?
What did the latest US CPI numbers show about core inflation and Fed policy outlook?
Just naught point two percent in December for the core number, two point six percent for the annual number. So I guess that means there could be more cuts to come, perhaps, from the Feds.
Yeah, good good morning, Phil, and and happy new year. The US CPI, the the main data overnight, although, you know, pretty pretty little to to show for it in terms of of market reaction. I think in the in the yeah, in the release there what we saw, core inflation, as you said, a little bit lower than expectations. It was point two four percent month on month. Expectations going into it were kind of the high side of a point three percent. And the themes there, you know, that was despite some of the payback that was anticipated from the the shutdown distorted uh November print, some somewhat coming through. You know, you saw in the detail the goods prices were a bit stronger following that that later sampling in in November that meant that, you know, goods prices reflected a bit more Black Friday discounting.
So they did rebound a bit, but maybe not quite as as much as feared. And you also got kind of, you know, that shelter Inflation component rents and owners equivalent rents back up to around 0.3%, running it at rates it was a couple of months ago after a couple of soft measures, bit of a bounce back in travel prices. But you know, even with all of that, it it didn't kind of, you know, wasn't quite as strong as as some forecasters had feared. So I think, you know, still constructive on the inflation uh backdrop. Um, but you know, if you step back, still too high, you know, annual inflation. Inflation there, two point six on the core measure, two point seven on on headline. Um and we've heard from a couple of of Fed speakers, Williams before that CPI data saying that interest rates are now well positioned.
He's anticipating that the unemployment rate will stabilize here and then gradually come down over the next few years. You had Muzulum speaking after the data, similar kind of messaging. He sees little reason for for near term further easing in the world. Policy.
How are Fed speakers’ comments shaping market expectations after the CPI release?
So overall, no no particular bad news. Um still something that probably means that FOMC speakers are kind of getting more comfortable that those upside risks they've been fearing on inflation are receding. The the worst of tariff pass through might be might be behind us. Um but the end of the day is they're they're seeing policy reasonably well positioned and nothing to suggest that they're going to need to move quickly in the short term. So market pricing little Little change, still looking at uh June as a a reasonable uh prospect, twenty four basis points by June, fifty three by the end of the year. Little change from the year.
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Chapters
8 chapters
1
How does softer US inflation keep the prospect of further rate cuts alive?
0:01–1:17
2
What did the latest US CPI numbers show about core inflation and Fed policy outlook?
1:17–3:07
3
How are Fed speakers’ comments shaping market expectations after the CPI release?
3:07–4:37
4
How did JP Morgan’s earnings results influence US equity markets and sector trends?
4:37–7:09
5
What is the RBNZ likely to do in response to New Zealand’s economic recovery?
7:09–9:40
6
Could President Trump’s message to Iran spark a surge in oil prices?
9:40–11:42
7
How are debates over Fed independence impacting the US dollar and other currencies?
11:42–14:01
8
What can upcoming US retail sales and PPI data tell us about consumer health?
14:01–15:14