STIR: $-Bloc Pricing Little Changed Over Past Two Weeks, Except For AUS
Interest rate expectations across the $-bloc have shown little net change over the past two weeks, except in Australia, which firmed sharply (+15bps).
- In Australia, the RBA decided to leave rates at 3.6% in a unanimous vote, which was widely expected. Its tone was generally more cautious than in August and it is definitely keeping its options open regarding future decisions with Governor Bullock not committing to an easing or neutral bias.
- The Board is concerned that market services inflation could be sticky, as has occurred overseas, while there are “signs that private demand is recovering” and that the labour market is “stable”
- Given heightened uncertainty, the updated growth and inflation outlook in the November staff forecasts will be key for the next decision. The Board stated it will update “its view of the outlook as the data evolve” signalling that it is even more data dependent. Q3 CPI is published on 29 October and September jobs data on 16 October .
- Looking ahead, the next key regional event is the RBNZ’s policy decision on October 8, with market pricing indicating 33bps of easing.
- Looking ahead to December 2025, current market-implied policy rates cumulative expected easing are as follows: US (FOMC): 3.62%, -51bps; Canada (BOC): 2.31%, -19bps; Australia (RBA): 3.45%, -15bps; and New Zealand (RBNZ): 2.39%, -61bps.
Figure 1: $-Bloc STIR (%)
Source: Bloomberg Finance LP / MNI
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSTRALIA DATA: Q2 Boosted By Special Factors, H1 Averaged 0.4% q/q
Q2 GDP was stronger than both the RBA and consensus expected as it rebounded from Q1’s weather-impacted soft result and benefited from holidays. It rose 0.6% q/q to be up 1.8% y/y, the strongest since Q3 2023, after 0.3% q/q & 1.4% y/y in Q1. Growth was driven by private and public consumption with net exports adding 0.1pp while both inventories and investment detracted. Given the RBA’S cautious stance towards easing and recent stronger data, a September rate cut looks unlikely and November will depend on new information and the outlook.
- The S&P Global PMI improvement over Q3 suggests growth may have improved further at the start of H2. The August composite rose to its highest since February 2022.
Australia GDP q/q% vs S&P Global PMI services
- Household consumption contributed 0.45pp to GDP as it rose 0.9% q/q to be up 2% y/y, the highest in 2 years, which was supported by a 1pp fall in the savings rate to 4.2%. Nominal disposable income rose 0.6% q/q.
- The ABS notes that the close proximity of Anzac Day to Easter boosted holiday-related spending. Also end of financial year discounting encouraged discretionary spending which rose 1.4% q/q.
- Government spending contributed 0.2pp to growth as it increased 1.0% q/q to be up 4% y/y driven by a strong increase in benefits paid and health expenditure as well as election and defence spending.
- Investment was lacklustre across the board with it detracting 0.2pp driven by the public sector with private capex neutral.
- Net exports made its strongest contribution to GDP in two years. Exports rose 1.7% q/q to be up 1.5% y/y, while imports increased 1.4% q/q & 1.9% y/y, a sign of improving domestic demand.
- GDP/person rose 0.2% q/q to be up 0.2% y/y, the first annual rise since Q1 2023.
Australia domestic demand y/y%
Source: MNI - Market News/ABS
CHINA PRESS: China To Exempt Taxes For Capital Replenish Social Security Fund
China has transferred part of its state-owned capital to replenish the social security fund, and introduced tax exemption to support the transfer, Yicai.com reported. To avoid additional tax burden during the transfer process, the transferred state-owned equity and cash income will be exempted from value-added tax, corporate income tax and stamp duty, and the implementation date is retroactive to Apr 1, 2024 with taxes paid before to be refunded, according to a document by the Ministry of Finance Tuesday.
CHINA PRESS: China's August Logistics Prosperity Index Rises To 50.9%
China's logistics prosperity index was 50.9% in August, up 0.4 percentage points from July, Securities Daily reported citing data by China Federation of Logistics & Purchasing. Total logistics business volume and new orders have grown rapidly, with the gradual implementation of policies to promote consumption, stabilise investment, and improve social wealth, the newspaper said citing Liu Yuhang, director of China Logistics Information Center. Companies’ expectations remain positive with the business activity expectation sub-index staying in the high prosperity range of above 55%, said Liu.
