AUSTRALIA: Easing Cycle May Be Done
When updated for Q3 CPI, Q2 GDP and the RBA’s November projections, our simple policy reaction function based on the core inflation and output gaps is signalling no further easing. As trimmed mean inflation doesn’t return to the 2.5% band mid-point by the end of 2027 on current assumptions, there is a risk of monetary tightening.
- The AUD OIS market has 17bp of easing priced in by September 2026 with almost nothing by the end of 2025.
- The reaction function implies around 75bp of easing in the year to Q3 2025 but that by Q2 2026 25bp of this has been reversed. The rate estimates then settle around 4% over H2 2026 and stay there in H1 2027.
- The equation uses a one quarter lead of trimmed mean inflation which the RBA revised up to 3.2% in Q4 2025 and Q2 2026 in its November projections. It then moderates towards 2.6%.
- Using the RBA’s GDP growth expectations of around 2%, the output gap is likely to be slightly negative over the forecast period.
- It is worth noting that econometric calculations are just estimates and not predictions.
Australia policy reaction function with trimmed mean CPI %
Source: MNI - Market News/LSEG
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US: Trump Oval Office Announcement Underway Shortly
US President Donald Trump is shortly due to deliver an announcement in the White House Oval Office. LIVESTREAM The announcement is expected to relate to drug pricing and could follow a similar template to a recent pledge from Pfizer.
- The announcement will be Trump's first press remarks since a market-moving Truth Social statement earlier today in which Trump suggested calling off a meeting with Chinese President Xi Jinping and raising tariffs on China in response to new export controls from Beijing on rare earths. See earlier bullets here and here.
RATINGS: Moody's Completes Periodic Review Of Belgium, No Rating Action
No ratings actions for Belgium from Moody's, which is quoted in a press release on Bloomberg: "Moody's Ratings (Moody's) has completed a periodic review of the ratings of Belgium and other ratings that are associated with this issuer. The review was conducted through a rating committee held on 2 October 2025 in which we reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), and recent developments. This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future."
- There had been some speculation there could be a ratings action - MNI wrote Thursday: "* Moody's on Belgium (Current rating Aa3, Outlook Negative): We expect Moody's to maintain their current stance in the absence of 2026 budget details."
MACRO ANALYSIS: US Macro Week Ahead: No CPI, But Plenty Of Pre-Blackout FedSpeak
Below is the week’s data schedule, with MNI’s annotation of whether or not data will be postponed.
- As we went to press, the Fed announced that next week's Industrial Production data will be postponed (was due to be published next Friday Oct 17) as the data “incorporate a range of data from other government agencies, the publication of which has been delayed as a result of the federal government shutdown.”
- We won’t be getting September CPI as scheduled on Oct 15, but at least the BLS announced it will publish the data on Oct 24.
- As such next week we’ll be looking at some under-covered data points, including the Redbook weekly and Chicago Fed’s CARTS retail sales data (in lieu of the Census Bureau retail sales report), with a little more focus than usual on regional Fed manufacturing indices (NY, Philadelphia).
- Once again, the dearth of tier-one data leaves Fed commentary in focus ahead of the pre-FOMC blackout period: highlights for us are Philadelphia Fed President Paulson making her first comments on monetary policy on Monday since being appointed in the summer, while as always Chair Powell bears watching on Tuesday (we also hear from Bowman, Waller, Collins, Miran, Schmid, and Musalem).
- Additionally we get the latest Beige Book which was already key given the FOMC was already increasingly focused on anecdotal information as it attempts to navigate murky economic waters.
