Softer CPI, RBNZ itching to hike, hope drives oil lower
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Why did the Australian headline CPI come in softer than expected and what does it mean for the RBA?
Australian inflation, the headline number was softer than expected yesterday. So what does that uh mean for the RBA now? We get the Fed's preferred inflation measure later today as well. And oiled down quite a bit because of statements made by Iran, which have seemingly now been redacted, but the oil prices stayed lower. Hope springs eternal, it seems. It's Thursday, it's the twenty eighth of may twenty twenty six. It's the morning call from NAP. Good morning. Well, big falls in oil today, four point eight percent off Brent, down below ninety five a barrel. WTI is down over five percent, down to eighty nine a barrel. Uh it's not really uh helped uh equities though. The Nasdaq and S P are pretty flat. Small moves in Europe as well, not much going on in bond markets either, though the Aussie ten year yields were down five basis points yesterday to four point eight five percent, but up six basis points overnight on futures.
And the US dollar uh only up a bit on the DXY, but the Aussie is down half a percent to seventy one point four US cents. Again, one of the biggest movers. Some of that might be to do with the uh CPI numbers yesterday, so let's start there with Nab's Gavin friend in London. I mean the headline rate was lower than expected, but if you look at the uh the the trim mean which is what counts, uh it's not really moved at all, has it?
No, it hasn't. So uh the uh the monthly trend mean rose at null point three percent on the month, three point four percent year on year in line, as you say. It was the headline that was uh two tenths uh better. Um inflation was cooler across food prices than expected, I think. And and whilst you know we can we might say that there's a cost push in pressure, maybe more evident perhaps in the coming months, you know, we have to see see how that where that goes. There's little sign of a kind Of a broader based pass-through in that category in sort of groceries in the April data.
How is the trimmed‑mean core inflation rate behaving and why does it keep the RBA on the sidelines?
Outside of groceries, there is some evidence of re-acceleration in components most exposed to the cost push shock. But again, it's limited breadth here so far. So the share of prices rising more than 3.5% on a three-month annualized basis, slipping back to 44.3% from way above that. uh, you know, in decent months. So um it's it's clear that uncertainty around inflation is is is is is very high, but the data is consistent uh with core trimmed mean, we think, of one percent Q on Q in Q two when we get that, and that is in line with the RBA's uh May s uh SOMP.
Well, uh our podcast tomorrow, the weekend edition, is looking at the impact on f uh fruit and veg prices which could be hit the hardest because of the the f uh shortages and price of fertilizer, which obviously has skyrocketed Australia's uh dependence on that. So that's an interesting story to listen to tomorrow. Uh household spending uh is out today as well. That's gonna be interesting 'cause the question is, is there demand destruction happening from higher prices? Mm.
Yeah, so NAV and the consensus expect household spend into fall, uh point five percent on the month in April. Part of that is reversing a strong one point six percent increase we saw in March. Part of it is the decline also reflects a pullback in spending driven by the lower value of uh of fuel prices uh following the halving of the fuel excise, um as well as some unwinding of uh earlier stockpiling behaviour. Behavior for food. We think a key focus will be whether discretionary spending slows or shows a further softening. Our spend trend data shows notable underperformance in travel related spending, but it's unclear whether this reflects a broader easing amid one off factors such as travel related refunds.
Other discretionary spending categories have been more resilient. So you know, we're still feeding our way through these numbers and seeing, you know, what the picture is telling us.
And the RB and Z uh rates on hold, uh, but not for much longer, it seems. I mean, it was a very hawkish take out from yesterday, wasn't it?
Yes, it was.
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Chapters
8 chapters
1
Why did the Australian headline CPI come in softer than expected and what does it mean for the RBA?
0:01–1:50
2
How is the trimmed‑mean core inflation rate behaving and why does it keep the RBA on the sidelines?
1:50–4:17
3
What does the RBNZ’s ‘hold but ready to hike’ stance indicate for New Zealand interest rates?
4:17–6:26
4
How are global oil prices reacting to the Iran‑Hormuz news and what could keep them low?
6:26–8:46
5
What are the latest U.S. core PCE numbers and how might they shape Fed policy?
8:46–10:22
6
Why are household‑spending trends falling and what could that mean for Australian consumer demand?
10:22–12:07
7
How might upcoming RBNZ rate hikes affect the New Zealand economy and employment?
12:07–13:57
8
What are the key geopolitical risks (e.g., Straits of Hormuz, EU‑China trade) that could impact markets this quarter?
13:57–15:51