Australian Inflation And Bank of Canada Rate Decision In Focus
An inflation figure announcement in Australia and the Bank of Canada’s (BoC) governing board meeting regarding interest rates are among the most important financial events as the week starts.
Bitcoin broke the $35,000 barrier for the first time in the last 17 months on the back of positive investor sentiment about a bitcoin exchange-traded fund. Later in the day, Microsoft and Google-parent Alphabet will publish their third-quarter earnings reports.
In the UK, a Reuters poll among economists showed that most of them expect the Bank of England’s (BoE) monetary policy committee to keep borrowing costs on hold in the upcoming November meeting.
Australia CPI Q3 2023 Report
Early on Wednesday morning, the Australian Bureau of Statistics (ABS) will publish the Australian CPI inflation data for the third quarter of the year. According to the latest ABS data, headline inflation rose by 5.2% in the 12 months to September, rising when compared to July’s figure.
Economists polled by Reuters forecast the September quarter CPI report to show an increase of 1.1% on a quarterly basis, bringing annual inflation down to 5.3% on a yearly basis, a significant improvement from the 6% reading recorded in the June quarter.
Economists at the Commonwealth Bank of Australia (CBA) wrote in a report: “The RBA is willing to engineer a slower return to their inflation target in order to preserve the gains made in the labour market. But as the October Board Minutes stated, ‘the Board has a low tolerance for a slower return of inflation to target than currently expected’ (note that this line was not in the September Board Minutes). Given the upside risks to our Q3 23 inflation forecast, we are of the view that the November RBA Board meeting is ‘live’ and ascribe a 40% chance of a 25bp rate hike.”
BoC Interest Rate Decision
A bit later in the day, the BoC will announce its decision on interest rates. The BoC was one of the first central banks to pause lifting borrowing costs. Market analysts don’t expect the BoC to move forward with any surprising moves and forecast rates to remain on hold.
Inflation in Canada declined to 3.8% on a yearly basis in September from 4% in August as was announced last week. The reading came in below the market expectation of 4%. Economists at RCB suggested that “economic data releases since the Bank of Canada opted to forego an interest rate hike in September have been mixed, but we expect that they on net have made a hike at next week’s decision unlikely.”
Market analysts at CIBC go even further saying that the BoC might refrain from adjusting rates until the end of the year, mentioning that “we were kind of breathing a sigh of relief a little bit after the last inflation numbers. The recent inflation figures suggest that it is starting to decelerate once again. And that, combined with the sluggish growth that we’ve seen, will probably keep (the Bank of Canada) on hold, not just this meeting, but really for the remainder of this year, and into next year as well.”
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