AU Data
- Monday 11.30 Producer Price Index previous 1.9% q/q
- Monday 11.30 New Motor Vehicle Sales previous -1.6% m/m
- Wednesday 11.30 Consumer Price Index previous 1.3% q/q
Release of RBA Minutes last week confirmed that the central bank is prepared to be patient and let recent rate hikes fully work through the economy. In a subsequent speech, Governor Stevens acknowledged that inflation (CPI) could still rise in the near-term but that ‘our chances of keeping inflation low over the medium term are good’. The market’s expectations for the path of interest rates has changed dramatically over the last two weeks and is now pricing a 40% chance that rates will start to fall in the next 12 months. Producer Prices and Consumer Prices will be watched closely this week and expectations adjusted accordingly.
NZ Data
- Monday 08.45 Visitor Arrivals previous 9.4% m/m
- Thursday 07.00 Monetary Policy Statement
- Thursday 07.00 Official Cash Rate Decision current 8.25%
The Consumer Price Index rose 1.6% in the April-June period from the previous quarter, the biggest quarterly rise since June 1990 and well above the 0.7 percent reported in January-March. Annualised inflation hit a two-year high of 4% in the second quarter as global food and fuel costs rose, but domestic price pressures eased and that should allow a cut in interest rates to support a sharply slowing economy. This week, the Monetary Policy Statement will be scrutinised closely for hints as to the timing and pace of these anticipated rate cuts; the first of which may come as early this week should the RBNZ decide the current 8.25% OCR is too tight for current conditions.
US Data
- Tuesday 00.00 Leading Index previous 0.1% m/m
- Tuesday 22.10 Treasury Secretary Paulson speech
- Wednesday 00.00 House Price Index previous -0.8% m/m
- Wednesday 00.00 Richmond Manufacturing Index previous -12
- Thursday 00.35 Crude Oil Inventories previous 3.0m
- Thursday 04.00 Beige Book
- Thursday 22.30 Unemployment Claims previous 366k
- Friday 00.00 Existing Home Sales previous 4.99m
- Friday 22.30 Core Durable Goods Orders previous -0.9% m/m
Last week saw release of minutes from the most recent Federal Open Market Committee meeting suggest that an increase in the Federal Funds rate might be closer at hand than many suspect, as the issue was openly debated at the June 24-25 meeting, and some FOMC members said that 'some firming in policy would be appropriate very soon’. In his semi-annual monetary policy testimony, Federal Chairman Ben Bernanke underpinned this view by stating a 'top priority' for the central bank is to bring inflation to an acceptable level. Concern about inflation looked well justified as the largest increase in commodity prices on record pushed consumer inflation in June to its fastest monthly rise since the early 1980s, June CPI rising by 1.1% from the previous month. Oil price oscillations and company reporting look set to dominate market attention this week.
JPN Data
- Tuesday 09.50 All Industries Index previous 0.8% m/m
- Thursday 09.50 Trade Balance previous 0.64t
- Friday 09.30 National Core CPI previous 1.5% y/y
- Friday 09.50 Corporate Services Price index previous 0.6% y/y
The Bank of Japan left its overnight call rate target unchanged at 0.5 percent for the 20th straight meeting, but the Japanese central bank stressed the need to maintain a neutral stance amid increased uncertainties after making a review of its semi-annual outlook. The Japanese central bank said if downside risks to the economy decrease, this would increase the risk of possible swings in economic activity and prices due to a prolonged period of accommodative financial conditions. BOJ Governor Shirakawa also tried to reassure the market that the Japanese economy was not slipping into a period of stagflation. This week inflation data will be watched closely but US data will dominate market action.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| AUS (RBA) |
7.25% |
+25bps |
04/03/08 |
5th August |
| NZ (RBNZ) |
8.25% |
+25bps |
26/07/07 |
24th July |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
5th August |
| JPN (BOJ) |
0.50% |
+25bps |
21/02/07 |
15th July |