Closing Bell 25th October: Australia’s CPI Surprises, Heating Up the Economic Outlook

Australia’s CPI Surges Beyond Expectations

Australia’s Consumer Price Index (CPI) has risen by 1.2% in the September quarter, surpassing economists’ predictions of a 1.1% increase. Annually, the CPI grew by 5.4%, with core inflation rising by 5.2%. Surging oil prices have been identified as a significant contributor to this inflationary pressure. The Reserve Bank of Australia (RBA), in response, may consider further interest rate hikes to manage inflation and ensure economic stability.

Australian Dollar and Bond Yields Ascend Post-Inflation Report

Following a stronger-than-anticipated CPI report, the Australian dollar and government bond yields have seen a rise. The likelihood of the RBA increasing the cash rate has also surged, with bond futures indicating a 58% probability of a rate hike in November, marking a significant shift from the previous 35% estimation.

Rising Geopolitical Tensions Threaten Oil Stability

BCA Research highlights increasing geopolitical risks, particularly in the Middle East, as a potential threat to oil stability. With escalating conflicts and strategic power plays involving countries like Russia, China, and Iran, there’s a looming risk of an oil shock. The uncertainty in these regions poses a substantial risk to global oil supplies, potentially impacting the global economic outlook for 2024.