Oil, inflation prints and a restored September rate-hike probability across four markets
Australia held its cash rate while naming oil supply, Norway and Egypt printed mixed July inflation, and a Monday market session restored a September Fed hike probability near half.
Economics & Markets··Midday
The RBA holds and names oil
The Monetary Policy Board of the Reserve Bank of Australia left the cash rate target at 4.35 per cent at its 11 August meeting, and the decision was unanimous. After three increases since the start of the year, the RBA says financial conditions have tightened: money market rates and government bond yields have risen and the exchange rate has appreciated. The Board does not expect inflation to return to around the midpoint of the target range until late 2027. It writes that disruption to global oil supply is adding directly to inflation and that higher fuel prices show signs of passing through to other goods and services, on top of capacity pressures. Consumer spending growth is slowing as expected, housing prices are falling in some capital cities and new housing loans are declining, while business debt and investment remain strong. Labour market conditions have eased by a little more than expected, and the Board wrote that it would raise the cash rate further if upside risks materialise.[1]
July inflation in Norway and Egypt
Statistics Norway reported that the consumer price index rose 1.0 per cent in July from June and 3.0 per cent over twelve months. The core measure, adjusted for tax changes and excluding energy products, rose 0.8 per cent in the month while its twelve-month rate stayed at 2.7 per cent, so the monthly gap sat mainly on energy. Housing, water, electricity, gas and other fuels rose 4.6 per cent over twelve months; transport rose 2.0 per cent in the month; food rose 3.2 per cent from June but only 1.1 per cent over the year. In Egypt, CAPMAS said annual urban consumer inflation accelerated to 14.9 per cent in July from 14.3 per cent, with nationwide annual inflation at 13.0 per cent. Thirteen analysts polled by Reuters had forecast 14.6 per cent to 16.3 per cent, so the urban rate sat at the bottom of that range. Urban food and beverage prices fell 0.6 per cent from June while remaining 8.0 per cent higher than a year earlier; rural annual inflation was 11.2 per cent.[2], [3]
Markets reprice September and oil
Kitco News reported that gold and silver rose in late New York trading on Monday as markets weighed weak jobs data against a rebound in crude, Treasury yields and Federal Reserve rate-hike expectations. Spot gold traded near 4,358.71 dollars an ounce, up 0.4 per cent, and front-month silver futures settled at 65.106 dollars an ounce, up 2.80 per cent. The implied probability of a September rate hike, which fell to 44.4 per cent from 54.7 per cent after Friday's payrolls, climbed back to 51.7 per cent. July payrolls fell by 23,000; on Monday the 30-year Treasury yield rose 5 basis points to 5.244 per cent, just below its 31 July high of 5.253 per cent. The S&P 500 slipped 0.1 per cent to 7,753.11 and the Nasdaq Composite 0.3 per cent to 26,605.36. Kitco linked the move to the Strait of Hormuz; Nymex WTI traded near 79.00 dollars a barrel and Brent near 85.00 dollars. Together with the RBA oil impulse and Norway's energy-heavy print, the session put oil and rate-path pricing back at the centre of the inflation conversation.[4]
