Friday: US inflation softer than forecast

US inflation in June is softer than forecast, further reducing expectations of a Fed hike in September. But US long bond yields hit new 19-year highs on fear Fed Chair Kevin Warsh won’t keep inflation low in the long run. The Bank of England holds.

In our deep-dive interview, ANZ Senior Economist Matthew Galt looks at what is driving regional differences in New Zealand’s housing market.

5 things to know in 5 minutes:

1. The core measure of US Personal Consumption Expenditure inflation rose 0.1% in June, which was below the consensus forecast for a rise of 0.2%. That saw expectations the Fed will hike in September sliced back to around 60% from being fully priced in before this week’s hold decision. ANZ Economist Bansi Madhavani says low core inflation will please the Fed for now.

2. The Bank of England held its official rate at 3.75% in another split vote overnight, with three of the nine rate committee members voting to hike, one more than the last decision. However, Governor Andrew Bailey pushed back against market expectations for a hike. Bansi sees an extended hold.

3. Attention now turns to the Bank of Japan’s rate decision today. Bansi says ANZ Research is expecting a hold with a signal that tightening will be appropriate in coming months.

4. Australian building approvals rose 7.2% in June after falling slightly in May. ANZ Economist Sophia Angala says that’s the largest monthly rise since February this year.

5. Business confidence in New Zealand surged 19 points to +56 in July, according to ANZ’s Business Outlook, although responses worsened after the RBNZ rate hike and resumption of the Middle East conflict. But inflation indicators still eased, says ANZ Senior Economist Matthew Galt.

Cheers,

Bernard.

PS: Catch you tomorrow with a review of the Bank of Japan’s decision later today.

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