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Speaker 1: Welcome to Fear and Greed the week Ahead. I'm Sean Aylmer,

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Speaker 1: and as always I'm joined by economist Stephen Kokulis. You'll

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Speaker 1: hind t him at thecook dot com and on X

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Speaker 1: using the handle the kok t h e k o UK. Stephen,

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Speaker 1: Good morning.

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Speaker 2: A very good morning to you, Sean.

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Speaker 1: Now wasn't much going on last week in terms of economics,

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Speaker 1: but I think Donald Trump probably made up for it.

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Speaker 2: He did, and it's very hard to work what he

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Speaker 2: made up for other than lots of chatter about policies

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Speaker 2: in a range of social policies he sort of got

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Speaker 2: rid of by decree sort of thing, and that's that's

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Speaker 2: not unimportant, but we'll let other people discuss those. But

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Speaker 2: from an economic perspective, the chatter about tariffs caused a

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Speaker 2: bit of volatility in the market. The chatter about DOGE

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Speaker 2: or the Department of Government Efficiency starting to wind back

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Speaker 2: a few programs, got a few people excited about repairing

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Speaker 2: the US budget, which does need repairing. But then on

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Speaker 2: the other hand, the talk of tax cuts well undo

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Speaker 2: some of that fiscal consolidation. So the markets had plenty

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Speaker 2: to go on. Even though the heart data on the

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Speaker 2: economy was pretty sparse.

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Speaker 1: Let's talk about this week. It's a massive a week.

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Speaker 1: I mean, given we're owning the we're owning the first month,

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Speaker 1: this could be one of the biggest data days, the

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Speaker 1: CPI data for December of the year, and that's an

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Speaker 1: early call in the first month of the year.

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Speaker 2: Stephen, it is nearly called. But I think you spot

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Speaker 2: on that all eyes have been on this December quarter

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Speaker 2: inflation data, which comes out on Wednesday, as being a

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Speaker 2: real catalyst for what the Reserve Bank will do with

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Speaker 2: monetary policy, and the market has got a high probability

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Speaker 2: of a rate cut price in prior to that number

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Speaker 2: being released. Of course, that may change after the number

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Speaker 2: comes out, depending whether it's high lower in between. But

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Speaker 2: really the Reserve Bank have held off doing what a

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Speaker 2: lot of other central banks around the world have done,

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Speaker 2: and they started cuting interestrates three six months ago. The

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Speaker 2: RBA said, no, we're not going to cut because we've

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Speaker 2: still worried about trimmed mean inflation. We're worried about services

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Speaker 2: inflation being sticky. We're worried about a little bit of

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Speaker 2: residual excess demand in the economy. So they've held off

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Speaker 2: until until now, and what Michelle Bullock, the RBA governor,

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Speaker 2: has been speaking about is that if inflation clearly tracks lower,

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Speaker 2: then yes, the door is open for a rate cut.

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Speaker 2: So that's why we economists and traders and everybody else

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Speaker 2: will be sweating on what that number, all those numbers

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Speaker 2: on inflation will actually be on Wednesday.

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Speaker 1: So what do we need to get to get a

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Speaker 1: rate cut.

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Speaker 2: It'll be the trimmed mean number that will be the driver,

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Speaker 2: and that is the sort of underlying inflation that excludes

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Speaker 2: a lot of the volatile items. And we know that

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Speaker 2: in the last few quarters there's been a lot of

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Speaker 2: government subsidies on electricity in particular, but dwelling rented in Queensland,

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Speaker 2: we have the fifty cent transport fairs and a few

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Speaker 2: other bits and bobs that have gone into that low

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Speaker 2: headline figure. So the RBA does say that they don't

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Speaker 2: take account of that specifically, that trimmed me the underlying measure. Okay,

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Speaker 2: if we get a zero point six percent quarter on

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Speaker 2: quarter increase, which still leaves the annual rate above three percent,

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Speaker 2: by the way, but it's that momentum that's coming down

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Speaker 2: quarter by quarter by quarter. If we get a point

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Speaker 2: six or less. I think it's game on for the

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Speaker 2: rate cut on the eighteenth of February.

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Speaker 1: Yep, yep.

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Speaker 2: If we get a point five, then clearly yes, I

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Speaker 2: think it's all but locked in. If we get a

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Speaker 2: point seven. It's that sort of fine a deal that

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Speaker 2: a point one difference can have such a big impact

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Speaker 2: because it does sort of lead to that annualizing sort

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Speaker 2: of six monthly data or even quarterly data to get

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Speaker 2: to the two and a half percent, which obviously a

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Speaker 2: point five brings you a little bit below that. The

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Speaker 2: point six is about that, and the point seven has

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Speaker 2: a bit above that. So that's the sort of number

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Speaker 2: I think will be the catalyst. I think that's what

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Speaker 2: the other reports that I've read, you know, over the

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Speaker 2: weekend and whatnot sort of have that as the sort

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Speaker 2: of bingo card for rate cuts. Point five yep or lower,

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Speaker 2: a point six probably, a point seven, probably not, and

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Speaker 2: a point eight no Wae.

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Speaker 1: Jose, Okay, I'm looking forward to it. Do you like

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Speaker 1: these sorts of boys, Oh?

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Speaker 2: I love them. You know, there's stuff to get your

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Speaker 2: teeth into. I was sort of lamenting that last week.

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Speaker 2: A week without data is like a final series without

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Speaker 2: Collingwood playing and Collingwood fan. You're sure you watch the

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Speaker 2: game and you see things evolved, but it's not quite

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Speaker 2: as excited as when there's lots of news coming out.

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Speaker 1: A few other central banks this week are meeting as well,

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Speaker 1: the European Union, Bank of Canada, US FED. They all

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Speaker 1: matter too.

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Speaker 2: They certainly do. And of course they have been the

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Speaker 2: ones that have been cutting into straits and so we'll

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Speaker 2: see what they're going to be doing with rates. And

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Speaker 2: of course we had last week we had the very

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Speaker 2: low inflation number from New Zealand and another fifty points

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Speaker 2: is priced into New Zealand for a few weeks time.

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Speaker 2: But for the FED, it's probably no change. The market

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Speaker 2: thinking now is that with the economy maintaining momentum, and

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Speaker 2: a couple of weeks ago we had that solid jobs

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Speaker 2: report out of the US, that they don't need to

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Speaker 2: cut and of course a lot of FIT officials have

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Speaker 2: come out and said, look, the Trump tariffs could be inflationary,

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Speaker 2: So probably a pause from the US, which is which

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Speaker 2: is a big deal Europeans and Canadians, while they're dealing

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Speaker 2: with very weak economies, inflation is nice and low. I

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Speaker 2: think the Canadian inflation numbers came out recently were below

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Speaker 2: the Bank of Canada's target. So we've pretty much got

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Speaker 2: twenty five basis point rate cuts baked into both the

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Speaker 2: European Central Bank and the Bank of Canada fed on

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Speaker 2: hold our inflation numbers. What more could you wish for? Ah?

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Speaker 2: What a week?

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Speaker 1: Stephen, enjoy it?

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Speaker 2: Thanks Sean. That was.

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Speaker 1: Economist Stephen kokulis better known as a Cook. You can

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Speaker 1: find him at the cook dot com and follow him

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Speaker 1: on ex using the handle of the kok I'm shining

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Speaker 1: on and this is fear and greed.

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Speaker 2: The week Ahead