Why did the ASX 200 jump on Australian Inflation Data
Inflation data for June out at 11.30am this morning came in below expectations and the market now believes the RBA will pause on rates this coming Tuesday. For June, prices increased 5.4% YoY (below 5.6% exp) while QoQ the 0.8% rate was below the 1.0% economists had tipped. Inflation peaked in December 2022 at 8.4% and if we (roughly) annualise the QoQ run rate we get a figure of 3.25%, and its falling – this is clearly good news.
In terms of the composition, we saw goods inflation continue to decelerate, although services inflation remains an issue. Food inflation +7.0%, Housing +7.4%, Holiday and travel 12.9%, Insurance +8.5% while core inflation (ex-volatile items and travel) was still up +6.1%.
Interest Rate Futures are now (only) pricing a 17% chance of an August hike with just 20bps of further tightening priced in by the market. There is a growing possibility that 4.10% will be the peak of this cycle, and if not, 4.35% is odds on, before we start talking interest rate cuts later in the year.
- Bond yields fell, as did the AUD while stocks rallied.
