What to Expect This Week
The week ahead is looking interesting, with one key number that will have a significant impact on Australia: the monthly consumer price index, which will be released on Wednesday. This number will give us an idea of how inflation is tracking and what the Reserve Bank might do with interest rates.
The Importance of Inflation
Last month’s inflation result was disappointing, which made the market think that inflation might be too sticky. This could mean that the Reserve Bank will have to delay cutting interest rates, which is what everyone is waiting for. If this month’s consumer price index comes in softer, it could put a November rate cut back on the table.
What It Means for Interest Rates
If the Reserve Bank can see that inflation is coming down, it will have every reason to cut interest rates and give borrowers some relief. The Americans have already cut rates once this month and are expected to cut them two more times before the end of the year. The focus is now on inflation, and if it’s under control, the Reserve Bank will be more likely to cut rates.
Global Markets
What happens in the US will also be important this week. Their core PCE index, which the Federal Reserve uses to guide its decisions, is due out soon. This number will be critical in shaping expectations for Fed policy. On Thursday, we’ll get US economic growth figures, which will tell us whether the economy is heading towards recession or if inflation is still the bigger problem.
Impact on the Stock Market
If inflation isn’t a worry, the stock market will love it. A friendly CPI result in Australia, combined with good news from the US, could set up a strong run into the end of the year. The Dow finished up 172 points over the weekend, which should set the tone for a positive open on the ASX. The Aussie dollar is currently sitting just under 66 US cents.
Keeping an Eye on the Numbers
While there will be plenty of noise this week from markets, politics, and other news, the key number to watch is Wednesday’s inflation read. This is the one number that could change the game for interest rates, markets, and investors.
Conclusion
In conclusion, this week is all about inflation and interest rates. The monthly consumer price index will give us an idea of what the Reserve Bank might do with interest rates, and the numbers from the US will also play a crucial role. If inflation is under control, we could see interest rates cut, which would be good news for borrowers and the stock market. It’s going to be an interesting week, and one that could set the tone for the rest of the year.
