Australian bonds sold off on Wednesday, pushing yields higher after a hotter-than-expected monthly CPI print. The futures market has now priced out the chances of a cut when the RBA meet next week, while assigning less than a 70% chance of any easing by Christmas. Suddenly, the doves are starting to lose the arm wrestle, which has seen a little weakness creep into some of the rate-sensitive stocks.
Overall, it was a tough day for people hoping for rate cuts in general after Jerome Powell reined in hopes for multiple cuts in the US after warning that inflation might rise and employment might fall, adding that there was no “risk-free path”. Powell’s warning against cutting too aggressively highlights the growing split inside the Fed, with Trump supporters wanting to go hard and fast while Powell’s camp is more restrained.
- NAB officially changed their call on Australian interest rates yesterday – they expect the cash rate to remain at 3.6% until May 2026 – this is a non-consensus call.
