GLOBAL MACRO
While prices remain above central bank targets in many countries, they are heading in the right direction given restrictive monetary policy. This is making many MPCs more confident that their next move in rates will be down with the ECB and Bank of Canada already having cut. The first Fed easing is now fully priced in for September and expectations for the RBNZ have been brought forward to later this year. However, the BoJ is expected to hike again later this year, while there is a risk of another RBA increase.
- OECD headline inflation looks set to have moderated further in June with most countries reporting a decline and if not it has been stable. Core has been more mixed though with the US lower, Canada higher and the euro area and UK steady, and it is above headline in many counties due to persistent domestic inflation pressures. Australia’s data prints on July 31 but core has stopped moderating and is running well ahead of the US and euro area.
Australia vs US/euro area underlying CPI y/y%
Source: MNI - Market News/Refinitiv/ABS
- Non-Japan Asian headline and core inflation have been fairly stable since March. Very low inflation in China has weighed on the aggregate, with only Thailand posting lower core. Excluding China June headline remained around 3.6% y/y, for the fourth straight month, and core at 1.9% y/y within most target bands. Rate cuts are expected once the Fed begins easing so as to maintain FX stability.
Non-Japan Asian CPI ex China y/y%
Source: MNI - Market News/Refinitiv/IMF
- Japan’s June CPI is out on Friday and Bloomberg consensus has both headline and core ticking up. The BoJ was well behind the rest of the world in starting its tightening cycle with the first move in March. Another hike is fully priced in for the September meeting though with just over 50% for July.
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