Week in review
- Australian headline inflation 3.6% y/y, core 4.0% y/y
- Eurozone composite PMI rises to 51.4
- U.S. 1Q real GDP 1.6% q/q annualised
Week ahead
- China PMI for manufacturing
- U.S. nonfarm payrolls and unemployment rate
- U.S. FOMC monetary policy meeting
Thought of the week
Australian inflation rose at a slightly hotter than expected pace over the first three months of the year and the disinflationary impulse appears to be fading. At 3.6% y/y this was the lowest rate of inflation since the end of 2021. However, this level is unlikely low enough for investors nor the RBA, given the sharp repricing of the rates outlook. In its February Statement of Monetary policy, the RBA projected an inflation rate of 3.3% by the middle of the year, a target which is quickly slipping away. The inflation pressure continues to be mostly domestic, as tradable inflation has not risen even as the Australian dollar has fallen by 2% on a trade weighted basis and 6% against the greenback this year. The RBA may be concerned that economic activity could pick-up later in the year as the consumer finds support, even as the labour market gradually softens. A rate cut is hard to justify in this environment but so is another rate hike.
Non-tradables holding up Australian inflation
Year-on-year
Market data
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