by Stephen Roberts | Oct 27, 2014 | Economic Weekly, Laminar Economist Stephen Roberts
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Our usual end of month review of economic conditions around the world shows that despite heightened concern about global economic growth prospects for 2015, recent economic readings from the United States and China have mostly been a touch stronger than expected and although Europe remains soft, there has been a firmer edge in the data of late. In Australia too, the data has been mixed-strength, but with evidence that inflation is very well contained. Central banks, including the RBA, have mostly adopted policy guidance on the easier side of expectations. All told, the run of slightly more positive than expected economic data plus dovish central bank guidance seem to have arrested and partly reversed the downward correction in risk assets through September and the first half of October.
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by Stephen Roberts | Oct 20, 2014 | Economic Weekly, Laminar Economist Stephen Roberts
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Australian headline CPI inflation averaged 2.95% y-o-y in the first half of 2014, just shy of the top of the RBA’s 2-3% target band. The good news is that inflation looks set to fall sharply and, on our forecasts, may average only 2.3% y-o-y in the second half of 2014, below the 2.5% mid-point of the RBA’s target band. Importantly, inflation looks set to remain around 2.5% or lower until at least mid-2015. The benign inflation outlook is a key reason why the RBA is likely to leave the cash rate at 2.50% for many months to come. This interest rate outlook is of course dependent upon inflation coming in along the lines we are forecasting. The first test of our inflation forecast occurs this week with the Q3 2014 CPI report out on Wednesday.
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by Stephen Roberts | Oct 13, 2014 | Economic Weekly, Laminar Economist Stephen Roberts
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Over the past month or so, views in global financial markets have been very mixed, ranging from US growth being strong enough and having enough improvement in its labour market to lead the US Federal Reserve to start lifting its funds rate from zero early-to-mid 2015, to global growth potentially softening and limiting US economic growth. Of course, if the latter is true, the Federal Reserve will not be lifting interest rates this side of 2016. Changing views are promoting a sharp lift in volatility in financial markets. During September, the US 10-year Treasury yield lifted by 16 basis points (bps) to 2.50%. A third of the way through October (at last Friday’s close) the US 10 year Treasury yield was down 22bps to 2.28%. The US share market has been on a roller-coaster ride too with the S&P 500 up 3.8% in August, down by 1.6% in September and down a further 3.4% in the first third of October.
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