RBA: Economy May Already Be Close To Capacity, Makes Further Easing Uncertain
Deputy Governor Hauser answered questions at the UBS Australasia Conference and noted that given capacity pressures and policy stance are difficult to measure, the outlook is unclear and the Board is monitoring the incoming data closely. The main takeaway was that the economy could already be close to trend growth and therefore supply constraints making further rate cuts difficult. If growth rises further without strengthening the supply side, then the pickup in inflation seen in Q3 may be persistent.
- Hauser talked of three scenarios – 1. Capacity pressures and demand growth are not as strong as expected and rates are cut; 2. Growth picks up further and labour market is already tight and so no further easing; 3. Trend growth rises as supply-side of the economy grows and productivity growth improves.
- He reiterated there are no point estimates of the NAIRU or “neutral” policy rate but given that capacity is likely a bit tighter, policy is closer to “neutral” than thought a little while ago and the Board will “feel our way” to see how restrictive it is by the impact seen in the data.
- The RBA assumed that two-thirds of the upside surprise in Q3 underlying CPI was temporary with one-third “signal”. It is monitoring outcomes, to see how accurate this judgement call was. He noted though that if the economy is “stuck at capacity”, then inflation could rise again but at this stage the RBA doesn’t know if this is the case.
- The central case is for activity to recover with inflation returning to just above the band mid-point without a material rise in unemployment. However, given heightened uncertainty around the outlook, the only thing for certain is that the forecasts will be wrong.
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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.
