Daily Flows

• Yesterday, some investors opted to wait for clarity, planning to invest post-CPI release.
• Despite this, there was still significant activity in term deposits, with offerings ranging between 4.75% and 5.00%.
• Outright NCD levels have edged lower alongside the tightening of BBSW, with 3-month domestic rates trading at 4.69% yesterday.

Markets Hold Breath for CPI

• A crucial CPI print will be released today, with markets expecting both headline and trimmed mean inflation to come in below the RBA’s forecasts.
• Factors contributing to a potential reduction in trimmed mean inflation include declining housing costs and softer rental price growth.
• Electricity prices are expected to subtract from headline inflation again this quarter, as government relief is treated as reduced prices.
• The short end of the yield curve has tightened significantly in anticipation of this data point.
• With the RBA maintaining cautious forecasts, today’s inflation data may align favourably with their outlook. While the labour market remains tight, this print could provide the RBA with justification to consider a rate cut in February.