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Australian CPI numbers on target

ByFIBO Group
Published 10/23/2014, 01:10 PM
Updated 03/09/2019, 08:30 AM

he Australian dollar is trading within a tight range today after the latest CPI numbers came in as expected. The year-on-year figure showed a reading of 2.3 percent while the quarter-on-quarter reading came in at 0.5 percent slightly above analyst’s forecasts of 0.4%. Most Analysts are forecasting an interest rate hike in the middle of 2015 around the same time as an expected rise in interest rates from the US Federal Reserve.

One analyst that sees things differently is Philip Moffitt from Goldman Sachs Asset Management’s head of fixed income in Asia-Pacific who predicts that the Reserve Bank of Australia may be forced to cut interest rates, even after the US Federal Reserve tightens. “The economy otherwise is weak. The unemployment rate is rising and the currency still is overvalued. So if you had to put a dollar down on a bet, your bet would be that policy needs to be easier rather than tighter” Fiscal policy is still reasonably loose, but that – in tandem with slight currency depreciation – only has the effect of pushing out GSAM’s call for a cut to next year from this year “The way we’d analyze it is prices are rising but it’s not creating a leverage bubble” “The idea that rates are low here from a domestic perspective is absolutely true but bench marked against the rest of the world we still actually have relatively high interest rates” “The demand for Australian assets, particularly fixed income assets for foreigners, is very, very strong” “By global standards we’re a high-quality high yielder and if you’re getting paid zero or negative in Europe – you’re actually having to pay the bank to hold your money – 3 per cent on an Aussie sovereign or 3.5 to four on a semi-[government bond] is pretty attractive”

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