RBA: 2-Way Risks, How They Develop Likely To Determine If Hold Prolonged
Nov-18 01:28
The November meeting minutes reiterated that the RBA’s central scenario is “in balance” with risks to both the downside and upside. How these risks will develop is likely to determine whether monetary policy stays on hold or rates are cut further and while it is “not yet possible to be confident” about which scenario will materialise, the Board will “remain cautious and data dependent”. With core inflation above target and ongoing signs of a recovery in demand, policy is likely to be on hold in December and into early 2026, depending on the data.
- It can “afford to be patient” as it watches the data and assesses what the implications for its estimates of spare capacity and the degree of restrictiveness. The October jobs data came out the week after the decision and were tentatively in line with the view of stronger growth supporting the labour market, and thus rates on hold.
- The discussion was centred on the outlook for policy beyond the November decision. Rates could be held at the current 3.6% if the recovery is stronger than expected. This could be driven by a better global backdrop or stronger household consumption due to higher incomes and wealth.
- Also, if inflation stays high or productivity weaker than expected, then the RBA could adjust its spare capacity estimates lower. Another factor keeping rates unchanged would be a change in the view that policy is still restrictive.
- It noted that “information received since the previous meeting had increased the probability” of the factors above occurring.
- The Board would ease if spare capacity increased driven by the labour market weakening “materially” especially in the “market sector” or growth turning out softer than expected due to cautious households.
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LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
Oct-17 20:51
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
Oct-17 20:30
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Oct-17 20:28
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
