In the three months to September, Australia's inflation rate was higher than the market expectation, and the quarterly inflation rose month on month, which increased the possibility that the Federal Reserve of Australia will press the reset button of interest rate increase next month, and pushed up the yield of Australian treasury bond bonds. The latest data released by the Australian Bureau of Statistics on Wednesday showed that the Consumer Price Index (CPI) increased by 5.4% in the third quarter compared to the same period last year, higher than economists' consensus expectation of 5.3%, and the previous value was 6%. A closely watched core inflation indicator that excludes volatility items rose by 5.2%, also exceeding economists' expectations.
This data may prompt the new chairman of the Federal Reserve of Australia, Michelle Bullock, to take action to raise interest rates. She warned last night that if there were a substantial improvement in the inflation outlook, the Federal Reserve would "not hesitate" to raise interest rates. Wednesday's data will be included in the latest forecast report by Federal Reserve staff, which will be provided to the Board at the next meeting.
The Federal Reserve of Australia (RBA) is the only central bank where traders are expected to raise interest rates
The expectation that the Australian Federal Reserve will raise interest rates on November 7 has significantly pushed up the Australian dollar and pushed the yield of Australia's three-year treasury bond bonds to a phased high of 4.28%, the highest level since 2011. ANZ Bank's response to the data is that the benchmark interest rate is likely to increase by 25 basis points.
Adam Boyton, an analyst at ANZ Bank, stated in a report that" We have been emphasizing the risk that the Federal Reserve may take action by the end of this year or early next year, and now we believe that this risk is likely to occur on November 7th Although 4.35% previously meant the peak level of cash interest rates, it is possible to tighten on this basis
The current bets in the Australian money market suggest that the probability of the Federal Reserve raising interest rates next month is as high as 80%, while the probability of a rate hike before inflation data is released is about 40%, and there is a risk of following the rate hike next year, making Australia the only developed country that may raise interest rates twice in the next six months.
The focus now shifts to Thursday, when Chairman Block and Assistant Federal Reserve Chairman Chris Kent will provide testimony in front of a parliamentary panel in Canberra.
The subconscious reaction of people is indeed to raise interest rates again. We believe that the discussions among the members of the Federal Reserve of Australia will be more balanced and insist on our call to extend the pause, "said James McIntyre, an economist at Bloomberg Economics.
The inflation report also shows that although the annual growth rate has slowed down, there has been a worrying acceleration trend in the quarterly growth rate. The latest forecast from the Federal Reserve of Australia in August shows that the inflation rate will still exceed the target of 2% -3% in the next two years. The Australian Federal Reserve will officially release its latest monetary policy outlook or statement three days after the November interest rate decision.
The new chairman of the Federal Reserve of Australia, Bullock, stated on Tuesday that the Federal Reserve has a higher tolerance for inflation exceeding the anchored target of 2% for an extended period of time than most other central banks. But she reiterated that the Federal Reserve of Australia will not allow price upward pressure to continue beyond 2025.
The Federal Reserve of Australia has a higher tolerance for inflation above target - forecasts show that Australia's CPI will not meet the target in the next two years
The pace of action of the Federal Reserve of Australia is more cautious than that of the Federal Reserve, with a rate hike of 4 percentage points, while the Federal Reserve's rate hike is 5.25 percentage points.
Prior to the release of the Federal Reserve's favorite inflation data, core PCE, on Friday, the US CPI and PPI rose more than expected in September. The data released on Friday is expected to show that "core" personal consumption expenditure (PCE), excluding food and energy costs, increased by 3.7% in September compared to the same period last year, down from 3.9% in August. The Federal Reserve's target inflation rate is anchored at 2%. Compared to last month, the US core PCE is expected to increase by approximately 0.3% month on month in September.
Even so, Federal Reserve officials seem to be keeping interest rates unchanged for the second time in a row next week, although they say they will still keep the option of raising interest rates. In the eyes of some Federal Reserve officials, the recent surge in 10-year Treasury yields means an interest rate hike equivalent to approximately 25 basis points.
Since July last year, the Australian Federal Reserve has been standing still, evaluating the impact of previous rate hikes. The current economic situation in Australia is mixed - consumer sentiment is pessimistic, while corporate confidence is high. Australian residents with mortgages are on the alert as they are forced to spend more and more of their income on home repayments.
On the other hand, the job market continues to ignore the high interest rate policy of the Federal Reserve of Australia, and the pace of recruitment remains strong. Australia's unemployment rate unexpectedly fell to 3.6% last month.
The third quarter CPI report released today in Australia also shows that the largest price increase was in automotive fuel, with a 7.2% increase, followed closely by housing rental and electricity costs; Partly offsetting these growth figures are the decline in prices for childcare, vegetables, domestic vacation tourism, and accommodation.
Carol Kong, a strategist from the Federal Bank of Australia, said that these data indicate that next month's interest rate meeting will be a "real-time meeting", referring to the increasing risk of interest rate hikes. She stated that with the possibility of market repricing and resuming interest rate hikes in November, the Australian dollar exchange rate may further appreciate in the coming days.