Jackson Hole Shifts Outlook

• Warsh struck a hawkish tone at Jackson Hole, unusually explicit about the need to lift the funds rate should inflation stay high, noting the economy remains around full employment and financial conditions are not overly restrictive.
• Short end yields rose in response, with the futures curve now pricing a 60% chance of a hike this month, up from 35% before the speech.
• Last week the domestic market came to recognise the risk that inflation stays higher for longer, bringing rate hikes back into play, and longer dated yields have remained elevated with the Australian 10yr at 5.10%.
• Domestically, Wednesday’s GDP release is a key input ahead of the RBA meeting later this month, with a hike priced at around 50%.
• Later in the week, US payrolls are expected to rebound by 55k after the 23k fall, a print that will weigh heavily on the FOMC decision, alongside local trade balance and private credit data.