Westpac: Q3 CPI Is A Potential Gamechanger

Westpac note that "CPI has not had a large impact on pricing for a number of quarters. This time, however, could be different. A particularly strong core number would go some way to franking current pricing and keep pressure on the RBA to at least acknowledge the risks to their 2024 expectation for rate hikes. It would also re-price long end inflation risks. A particularly weak number, however, would certainly push market pricing for the start of the cycle back a quarter or so and probably remove 1-2 hikes out of the forward projection for 2024 and 2025. Both would have a potentially large impact on valuations, although given current hawkishness, and recent long end cross market outperformance, the latter is likely to have a slightly larger impact."

• "In our view, as extreme policy accommodation continues to be wound back around the world, the curve will be defined by a tactical steepening phases being short-lived and shallow within a secular flattening."