Inflation

[waterbottle]

CPI actually rose 0.1% in Dec, instead of falling 0.1% as initially reported.... And it wasn't the only month
I wonder where JPowell thinks rates should settle now...

https://www.google.com/amp/s/amp.cnn.com/cnn/2023/02/10/economy/cpi-revisions-december-inflation/index.html

Month: Original data vs. Revised

January: 0.6% vs. 0.6%

February: 0.8% vs. 0.7%

March: 1.2% vs. 1%

April: 0.3% vs. 0.4%

May: 1% vs. 0.9%

June: 1.3% vs. 1.2%

July: 0.1% vs. 0%

August: 0.1% vs. 0.2%

September: 0.4% vs. 0.4%

October: 0.4% vs. 0.5%

November: 0.1% vs. 0.2%

December: -0.1% vs. 0.1%

 

[waterbottle]

JB Hifi thinks retail is cooling

Consumers cut spending ahead of three more RBA rate rises

Financial markets have ramped up expectations the Reserve Bank will raise its cash rate at least three more times to above 4 per cent this year to combat inflation.

www.afr.com

Rumours of the RBA targeting a terminal rate >4%. Fok.

RBA cancels second Barrenjoey briefing

Chatter in the fixed income market is at DEFCON 1 following Reserve Bank Governor Philip Lowe’s lunch on Thursday at the investment bank.

www.afr.com

Meanwhile, swiss inflation heading upwards... Can we blame it on crude?

 

[Dona Ferentes]

excerpt from a perma-hawk:

Here are some of the sharpest talons from the RBA’s statement.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”

That was the concluding sentence.

You always read the concluding paragraph first.

At the beginning of the final paragraph, the sentence below is unambiguous.

“The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary.”

For me it was the forecast for inflation which really shocked me.

“The central forecast is for CPI inflation to decline to 4¾ per cent this year and to around 3 per cent by mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.”

The RBA is forecasting that inflation will only fall to the top of their 2-3% band by mid-2025!

 

[over9k]

Crude and baby bust. A lot of this inflation stuff has legs and it's not a transfer from tech into oil or whatever (though some is).

 

[investtrader]

This is interesting. In the last few years the freight costs have been punitive, but there is a dramatic shift. I think inflation may cool more quickly than forecast by RBA when consumer demand crashes later this year.

 

[Knobby22]

excerpt from a perma-hawk:

Here are some of the sharpest talons from the RBA’s statement.

That was the concluding sentence.

You always read the concluding paragraph first.

At the beginning of the final paragraph, the sentence below is unambiguous.


For me it was the forecast for inflation which really shocked me.


The RBA is forecasting that inflation will only fall to the top of their 2-3% band by mid-2025!

I think the US Fed may engineer a soft landing but here in OZ, due to the limited competition in many areas of the economy and the fact we still have plenty of money sloshing around it will be unfortunately be necessary to drive the economy into recession if we want to control inflation.
So a further 1% rise is my guess as long as the Reserve Bank Governor doesn't blink.

 

[JohnDe]

This is going to affect inflation in Australia -

Rent crisis to worsen as Chinese students return

The nationwide rent crisis is about to get worse as 40,000 Chinese students have been told to return to Australia to finish their face-to-face studies immediately.

An unexpected edict from Beijing places a new layer of demand on inner-city apartment markets where prices are already rising by more than 20 per cent a year.

NAB Markets Research latest property report notes that overseas students are returning to ‘‘a very tight market where rents are rebounding”.

Tapas Strickland, head of market economics at NAB Markets Research says: “A lot more overseas students coming back into these inner-city markets loads further pressure on rents immediately.”

As The Australian has reported, the return of Chinese students to Australia could be worth $5bn for the wider economy, but not without extracting a price on the residential market.

Torie Brown, executive director, student accommodation, at the Property Council of Australia suggests: “Unfortunately, specialist student accommodation is already tight – there are zero vacancies in some cities such as Brisbane, while other centres are filling up fast.”

Overseas students will be looking for rental accommodation in the most overheated districts of cities where apartment rentals are rising faster than any other property category.

Analysts suggest rent prices are still rising by up to 2 per cent a month, while across the major cities overall “asking rents” jumped by up to 25 per cent in 2022 – around three times the level of inflation.

“We are talking about 40,000 students coming back into the market. And that is just students from China, we also have students returning from all over the world,” Brown suggests.

She says the lack of local investment in student accommodation, along with a stand-off among investors in the residential rental market, has exacerbated the problems facing the sector.

“We can’t get local investors into student accommodation, the big super funds do not go near it though they are willing to enter this area in other markets such as the UK and Canada. In our market the money is almost entirely from offshore investors,’ she says.

Strickland suggests investors will become more interested in the property sector as they become aware of the improving rental returns in the market, but for now investor lending for property remains stuck at long-term average levels.

The Property Council, which describes the education sector as “Australia’s largest service industry export” has lobbied to get more student accommodation constructed, partly through making it more attractive for foreign investors. According to a report from the council, special transaction fees imposed on foreign investors for a $50m residential property are more than $1m, but just $13,200 for a commercial property.

“While there have been some GST and managed investment trust supports for purpose built student accommodation (PBSA), the sector still faces headwinds,” the report suggests.

The council also argues that PBSA bolsters rental supply by providing additional housing options that equates to around two- thirds of current private rental vacancies. As the property industry would have it, this means that without PBSA the broader rental crisis could be even worse.

Rental vacancy rates across Australia are hovering around 1 per cent and may even tighten further in the months ahead.

Separately, universities are under pressure to improve student accommodation, especially those with campuses in the inner cities. Shortages of student accommodation in other markets – especially Europe – have prompted government intervention which creates new problems in crimping the wider education sector.

Among the tightest housing markets in the world, Holland and Ireland have seen a range of initiatives to alleviate a deepening rental crisis. After months of political pressure in Holland, the government stepped in last month to direct universities to stop receiving international students.

JAMES KIRBY WEALTH EDITOR

 

[over9k]

 

[over9k]

CPI numbers in, right on estimates of +0.5 month on month and above year on year estimates with 6.4 vs 6.2, everything nosedives and then bounces. Very volatile. Still have cash ready.

Edit: And now a nosedive off the bounce again. Mental. Market really doesn't know what to think honestly.

 

[waterbottle]

CPI numbers in, right on estimates of +0.5 month on month and above year on year estimates with 6.4 vs 6.2, everything nosedives and then bounces. Very volatile. Still have cash ready.

Edit: And now a nosedive off the bounce again. Mental. Market really doesn't know what to think honestly.

There's no point trading these days :/ unless you have nads of steel

 

[over9k]

There's no point trading these days :/ unless you have nads of steel

Grabbed a little more NRGU at 521 today. Now playing NRGU, SOXL & FNGU. SOXL/FNGU performing massively better than TQQQ.

All degen plays.

 

[waterbottle]

US 6 month bond yields finally over 5%, hit 5.07% last night thanks to CPI.

My gut tells me Phil Lowe has again taken the lead on the international stage - following a 'private lunch' with some bankers, Australian yields shot up (as reported in the AFR) in early Feb. He's due to explain himself at a government enquiry.

I also remember Larry Summers calling for rates with of 6%.

Is the job done? I suspect JPowell would say no.

 

[waterbottle]

How long until the market prices out a rate cut in 2023?

 

[mullokintyre]

View attachment 152994

How long until the market prices out a rate cut in 2023?

I am not sure the market has any more idea than any other org or individual.
Mick

 

[CityIndex]

Speculation on tightening cycles will likely continue seesawing over the near-term as inflation and growth data prints above or below consensus, and comments from CB officials signalling various possibilities.

That being said, RBA Gov Lowe is speaking in front of the Senate in just over 10 minutes, and it will be interesting to see what sort of tone he strikes.

 

[waterbottle]

Speculation on tightening cycles will likely continue seesawing over the near-term as inflation and growth data prints above or below consensus, and comments from CB officials signalling various possibilities.

That being said, RBA Gov Lowe is speaking in front of the Senate in just over 10 minutes, and it will be interesting to see what sort of tone he strikes.

How's this for more (un)certainty

I don’t think we’re at the peak yet': RBA governor on interest rates​

On the cash rate, and high it will go, Philip Lowe says:

We’ve got an open mind.
I don’t think we’re at the peak yet but how far we have to go up I don’t know.
It will depend upon inflation data, resilience, spending, and what’s happening with wages.
I don’t think we’re at the peak yet but how far they need to go, we’re still unsure.

 

[divs4ever]

How's this for more (un)certainty

WOW !!

the RBA Governor starting to agree with me , now i am really worried !

 

[JohnDe]

WOW !!

the RBA Governor starting to agree with me , now i am really worried !

Maybe it is the other way around, you agree with the full-time governor of the RBA.

 

[JohnDe]

"Around one million households will have to drastically cut back their spending due higher interest rates and soaring inflation."

 

[divs4ever]

Maybe it is the other way around, you agree with the full-time governor of the RBA.

then the RBA Governor should seek mental health evaluation ( maybe they can diagnose him )