CPI Overshoot Shifts the Outlook

• The Q3 CPI data confirmed what early monthly indicators had hinted at, inflation is running well above the RBA’s August forecasts.
• The trimmed mean, the RBA’s preferred inflation measure, came in at 1.0% q/q and 3.0% y/y, compared with consensus at 0.8% and the RBA’s own August projection of 0.6%.
• Housing and new dwelling costs again proved sticky, while services inflation remains a key concern for policymakers.
• The RBA is now expected to hold the cash rate steady in November, with near-term rate cuts looking increasingly unlikely. Consensus is building that May could mark the next move, pending further prints on inflation and employment trends.
• In the US, the FOMC cut the Funds rate by 25bps to a new range of 3.75% to 4.00%, as anticipated, though Chair Powell pushed back against the idea of further easing’s, saying a December cut is  “is not a foregone conclusion. Far from it.”
• Powell’s tone came across more hawkish than anticipated, lifting US 10-year yields by 9bps to 4.08% following the press conference.