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$-Bloc Continues To Pare Year-End Easing After This Week’s Inflation Data

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STIR markets within the $-bloc continue to price out dovish policy projections for this year. Year-end official rate projections have firmed by 5-29bps compared to levels from a week ago, with the most notable increase observed in Australia. The other markets are around 5bps firmer.

  • The Australian market's move was triggered by the release of Q1 CPI data on Wednesday, which surpassed expectations, indicating hotter-than-anticipated inflationary pressures.
  • Overnight, the US GDP report for Q1 showed weaker growth and higher inflation than expected. Weekly claims were also lower than expected.
  • US GDP rose by an annualised 1.6%, below the 2.5% consensus, partially explained by a shortfall in private consumption (2.5% against 3.0% expected). The core PCE deflator was stronger than expected, running at an annualised 3.7% (3.4% expected).
  • US rates markets focused on the latter, with a further paring of year-end rate cut expectations.
  • December 2024 expectations and the cumulative easing across the $-bloc stand at: 4.99%, -35bps (FOMC); 4.44%, -56bps (BoC); 4.43%, -8bps (RBA); and 5.26%, -25bps (RBNZ).

Figure 1: $-Bloc STIR (%)

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STIR markets within the $-bloc continue to price out dovish policy projections for this year. Year-end official rate projections have firmed by 5-29bps compared to levels from a week ago, with the most notable increase observed in Australia. The other markets are around 5bps firmer.

  • The Australian market's move was triggered by the release of Q1 CPI data on Wednesday, which surpassed expectations, indicating hotter-than-anticipated inflationary pressures.
  • Overnight, the US GDP report for Q1 showed weaker growth and higher inflation than expected. Weekly claims were also lower than expected.
  • US GDP rose by an annualised 1.6%, below the 2.5% consensus, partially explained by a shortfall in private consumption (2.5% against 3.0% expected). The core PCE deflator was stronger than expected, running at an annualised 3.7% (3.4% expected).
  • US rates markets focused on the latter, with a further paring of year-end rate cut expectations.
  • December 2024 expectations and the cumulative easing across the $-bloc stand at: 4.99%, -35bps (FOMC); 4.44%, -56bps (BoC); 4.43%, -8bps (RBA); and 5.26%, -25bps (RBNZ).

Figure 1: $-Bloc STIR (%)

Keep reading...Show less