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Printed: 20 April 2024 5:33 PM

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1 Mar 2024 - Hedge Clippings | 01 March 2024

By: FundMonitors.com

    

Hedge Clippings | 01 March 2024

This week's inflation figures were encouraging, but unlikely to prompt the RBA to change their approach at their next board meeting. Annual inflation stayed steady at 3.4% in the 12 months to January, well down from the peak of 8.2% in December 2022, while the number for underlying inflation, excluding volatile items, dropped fractionally to 4.1%, also well down from its December 2022 peak of 7.2%.

We have long held the view that getting inflation down the "last part" to the RBA's target of 2.5% will be the most difficult, and the RBA has been consistent in its guidance that they won't be rushed into cutting rates too soon - at least not until they are convinced the battle has been well and truly won. So while there will be calls from some quarters for a cut sooner rather than later, the RBA is more likely to reverse that, (i.e. later rather than sooner) particularly as the Wage Price Index (WPI) for the December quarter came in at 4.2% - indicating that wages rose faster than inflation. Until the RBA sees the unemployment rate, currently 4.1%, nudge higher they're not going to feel comfortable cutting rates and sending a signal that the inflationary problem is over - even if the actual inflationary cycle has turned.

Normally we'd be waiting until the RBA's meeting next Tuesday, but under the board's new structure the normal first Tuesday of the month meeting is now postponed to 18-19th of March, by which time the ABS will have released a slew of data to keep economists busy, with next week seeing National Accounts (including GDP) on Wednesday, and of particular interest to Hedge Clippings, the statistics on the Managed Funds sector due on Thursday.

Elsewhere next week our attention will be piqued by Super Tuesday in the USA, when 16 states vote for their preferred Republican and Democratic candidates. Both Joe Biden and Donald Trump would appear to be a shoe-in for their respective party's nominations, with Nikki Haley hanging in there in the hope of a Steven Bradbury like finish if Trump can't overcome his multiple issues with various court cases, and Joe Biden just hoping to hang in there, full stop, or as they say in the USA, period! Both Biden's and Trump's greatest hope for a clear - if not clean - result in November, would seem to be the other's failings.


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