Australian CPI Inflation Drops In August, SNB To Decide On Interest Rates

Australian headline inflation fell to the Reserve Bank of Australia (RBA) target band in August according to a report published earlier in the morning. Australia’s central bank has forecast that inflation will fall for some time, before heading up again as underlying inflationary pressure remains high.

In Switzerland, the central bank is likely to reduce its interest rates after its monetary policy meeting tomorrow.

SNB Interest Rate Decision

The Swiss National Bank (SNB) will announce its interest rate decision on Thursday morning. According to economists’ forecasts, the SNB is expected to lower its borrowing costs by 25 basis points for a third meeting in a row.

A poll by Reuters also showed that a slight majority of economists expect the SNB to hold rates in December, cut rates again in March 2025 and then refrain from adjusting borrowing costs until the end of 2026.

The Swiss franc has strengthened in the last few months against its rivals. However, its strength has become a problem for Switzerland’s exporting capability as the SNB’s head Thomas Jordan recently said.

Australian CPI Inflation Falls To Target Band In August

Australia’s CPI inflation fell from 3.5% in July to 2.7% in August according to a survey by the Australian Bureau of Statistics (ABS). While headline inflation fell to the target range wanted by the RBA, core CPI inflation came in at 3.4%, 0.4% less than July’s reading but still much above the RBA’s aim.

As consumer prices growth fell to the lowest level recorded since the beginning of 2022, some economists suggested that government rebates played a role in the drop.

According to Westpac’s analysts, “these rebates have a shelf life and will expire by the end of 2024-25. By helping to reduce inflation expectations and due to second round indexation impacts, particularly related to administered prices, these rebates are likely to have second round impacts that are minor, but lasting. We have reviewed the translation of the monthly data across to our September quarter CPI forecasts and are comfortable to leave them as they are at 0.3%qtr for the headline CPI and 0.7%qtr for the Trimmed Mean.”

BoE’s Greene Says Cautious Approach Is Appropriate

The Bank of England (BoE) Monetary Policy Committee (MPC) member Megan Greene said in her speech in the Chambers of Commerce in Newcastle that the UK’s central bank should have a cautious approach to easing monetary policy.

Greene reiterated that the MPC will be looking for incoming data proving that inflationary pressures are retreating but added that while wage growth has dropped, it remains above the BoE’s projections. 

Market analysts suggest that the BoE could cut interest rates by 25 basis points in its November monetary policy meeting.

Goldman Sachs CFO Says US Economy On Track For Soft Landing

Goldman Sachs chief financial officer, Denis Coleman, said that the last large interest rate cut implemented by the Fed last week could put the U.S. economy on track for a soft landing.

Coleman noted that “I think this first 50 basis point cut is a clear signal in terms of the new direction. And hopefully that will unlock incremental amounts of confidence and should obviously reduce cost of capital — and perhaps for some more strategic activity heading into the end of this year.”

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