Daily Flows & Insights – U.S. CPI Hotter Than Expected

Daily Flows

  • With most banks expecting mid month in flows, any bespoke rates have been snapped up quickly.
  • Today, a green-friendly BBB+ bank is offering 5.15% for a 12 month term deposit.
  • Those with limits set up with foreign branch banks are rewarded with wider margins on 3 month NCDs ranging for +50/+55

Consumers March On Confidently and Business Conditions Eased

  • Westpac Melbourne Institute Consumer Sentiment Index surged 6.2% to 86 in February, hitting a twenty-month high.
  • Driving factors include improved sentiment towards major purchases and year-ahead expectations, propelled by cooling inflation and positive interest rate outlook.
  • Despite gains, cautious comments from the RBA tempered the rally, signaling continued pessimism among consumers.
  • Business confidence remained low, with conditions slightly below the long-run average, marking a two-year decline from above-average conditions. Forward orders stayed soft, particularly in retail and services sectors.
  • Despite elevated capacity utilisation, businesses reported increased cost growth for labor and other inputs, alongside rising product prices, indicating potential pressure on margins.
  • NAB Chief Economist Alan Oster noted a gradual easing in business conditions, particularly in the services and retail sectors, while confidence remained weak across industries, with ongoing economic pressures and high costs.

U.S. CPI Hotter Than Expected

  • In January, the US ‘core’ CPI inflation saw a 0.3% month-on-month increase, with core inflation rising by 0.4% month-on-month, marking its highest level since June.
  • The rise in shelter costs, particularly in rent for primary residences and owners’ equivalent rents, contributed to the overall inflationary trend.
  • The Federal Open Market Committee (FOMC) is unlikely to implement cuts until the third quarter, as stronger-than-expected CPI data suggests no immediate need for adjustments in interest rates. Market sentiment has shifted, with the first rate cut now anticipated for June.
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Curve Team
Jack Pedersen