1 00:00:08,190 --> 00:00:11,219 Sean Aylmer: Welcome to Fear and Greed - The Week Ahead. I'm Sean Aylmer, and as 2 00:00:11,219 --> 00:00:13,318 Sean Aylmer: always at this time on a Monday morning, I'm joined 3 00:00:13,320 --> 00:00:18,299 Sean Aylmer: by economist Stephen Koukoulas. You'll find him at thekouk. com, T- H- E- K- O- U- 4 00:00:18,299 --> 00:00:21,480 Sean Aylmer: K dot com, and on X using the handle @ TheKouk. 5 00:00:22,410 --> 00:00:24,630 Sean Aylmer: Stephen, good morning. Have you always been known as The 6 00:00:24,630 --> 00:00:27,090 Sean Aylmer: Kouk? I mean, I suppose growing up at high school 7 00:00:27,090 --> 00:00:28,680 Sean Aylmer: you would've been Kouk or Kouky, or something. 8 00:00:29,069 --> 00:00:32,280 Stephen Koukoulas: Yeah. Yes. All of that. I've been called worse, but The Kouk is actually quite 9 00:00:32,280 --> 00:00:35,550 Stephen Koukoulas: good because it sort of characterizes my approach to economics. 10 00:00:35,760 --> 00:00:38,280 Stephen Koukoulas: You know? Don't just have the consensus hugging view on 11 00:00:38,280 --> 00:00:40,200 Stephen Koukoulas: things, go out there a bit. Call it as you 12 00:00:40,200 --> 00:00:43,080 Stephen Koukoulas: see it, and that's how you sort of get an interesting view on 13 00:00:43,080 --> 00:00:45,418 Stephen Koukoulas: the economy, because we know the consensus is often wrong. 14 00:00:45,420 --> 00:00:46,079 Stephen Koukoulas: But, anyway. 15 00:00:46,200 --> 00:00:48,269 Sean Aylmer: So true. Big week coming up, but let's just check 16 00:00:48,269 --> 00:00:50,040 Sean Aylmer: in with what happened last week. The big one, of 17 00:00:50,040 --> 00:00:52,440 Sean Aylmer: course, was the December quarter CPI. 18 00:00:53,100 --> 00:00:57,000 Stephen Koukoulas: Huge news, and it came in under market expectations. More 19 00:00:57,000 --> 00:00:59,310 Stephen Koukoulas: important than under market expectations, it was under what the 20 00:00:59,310 --> 00:01:03,420 Stephen Koukoulas: Reserve Bank put in their November 2023 statement on monetary 21 00:01:03,420 --> 00:01:07,259 Stephen Koukoulas: policy. That was the quarter, or the statement, that they 22 00:01:07,259 --> 00:01:10,709 Stephen Koukoulas: revised, upped their inflation outlook. Remember at the time, too, 23 00:01:10,709 --> 00:01:16,440 Stephen Koukoulas: that was when the Gaza- Israel conflict escalated. Oil price 24 00:01:16,440 --> 00:01:19,560 Stephen Koukoulas: shot to $ 95 a barrel. There was some fear that 25 00:01:19,560 --> 00:01:22,200 Stephen Koukoulas: inflation was going to be resilient. The Reserve Bank, I 26 00:01:22,200 --> 00:01:23,938 Stephen Koukoulas: don't want to be too critical, but they saw that. 27 00:01:24,179 --> 00:01:26,549 Stephen Koukoulas: We had a strong employment number that particular month, they 28 00:01:26,549 --> 00:01:30,990 Stephen Koukoulas: hiked. Fast- forward to the inflation outcome. It came in at 0. 29 00:01:30,990 --> 00:01:34,380 Stephen Koukoulas: 6 for the quarter. So if you annualize that, so 30 00:01:34,380 --> 00:01:38,550 Stephen Koukoulas: roughly multiply that by four, you're getting 2.5%. So, that 31 00:01:38,550 --> 00:01:42,509 Stephen Koukoulas: momentum down, down, down on the quarterly inflation ratings. If 32 00:01:42,509 --> 00:01:45,419 Stephen Koukoulas: it continues, and it probably will, means that we're going 33 00:01:45,420 --> 00:01:48,359 Stephen Koukoulas: to be within the RBA target band during the course 34 00:01:48,359 --> 00:01:51,810 Stephen Koukoulas: of 2024. So that low inflation rating, including on the 35 00:01:51,810 --> 00:01:55,290 Stephen Koukoulas: underlying measures, the trim main measures, are really good news 36 00:01:55,290 --> 00:01:59,009 Stephen Koukoulas: that their inflation problem... Well, yeah. Do we do a George 37 00:01:59,010 --> 00:02:03,059 Stephen Koukoulas: W. Bush and declare victory? We're almost there, we're almost there. 38 00:02:03,299 --> 00:02:05,129 Sean Aylmer: Yes. So I mean, just quickly on that. Jerome Powell, 39 00:02:05,129 --> 00:02:08,250 Sean Aylmer: the US Federal Chair last week, also, same sort of 40 00:02:08,250 --> 00:02:11,340 Sean Aylmer: deal, the same situation there, but he didn't declare victory. 41 00:02:11,340 --> 00:02:12,150 Sean Aylmer: In fact, he kind of- 42 00:02:12,360 --> 00:02:12,361 Stephen Koukoulas: Yeah. 43 00:02:12,361 --> 00:02:14,999 Sean Aylmer: ... pointed out that, yeah, it's still too high. 44 00:02:16,050 --> 00:02:18,660 Stephen Koukoulas: He was quite explicit saying, " Look, we're really happy with 45 00:02:18,660 --> 00:02:20,639 Stephen Koukoulas: the way the inflation trajectory is going," that it's sort 46 00:02:20,639 --> 00:02:24,119 Stephen Koukoulas: of come down nicely. The economy's definitely been more resilient than 47 00:02:24,480 --> 00:02:26,610 Stephen Koukoulas: they, and I think just about every economist, thought during 48 00:02:26,610 --> 00:02:29,250 Stephen Koukoulas: 2023. So they're sort of saying that, " Look, we're pretty 49 00:02:29,250 --> 00:02:34,080 Stephen Koukoulas: happy the momentum on the monthly reads on the inflation, 50 00:02:34,080 --> 00:02:37,409 Stephen Koukoulas: the core inflation, and their..." What is the household expenditure 51 00:02:37,469 --> 00:02:38,521 Stephen Koukoulas: index. They're all- 52 00:02:38,521 --> 00:02:38,640 Sean Aylmer: Yeah, yeah. 53 00:02:38,640 --> 00:02:41,969 Stephen Koukoulas: ... coming down towards the target. He's sort of saying that, " 54 00:02:41,969 --> 00:02:45,330 Stephen Koukoulas: Look, we're happy, but we want confirmation." Yeah. We've all 55 00:02:45,330 --> 00:02:47,220 Stephen Koukoulas: been around long enough to see in economics occasionally there's 56 00:02:47,220 --> 00:02:50,040 Stephen Koukoulas: a blip, but does it get sustained? The blips can 57 00:02:50,040 --> 00:02:52,590 Stephen Koukoulas: often unwind very quickly. So the US Fed is sort 58 00:02:52,590 --> 00:02:55,829 Stephen Koukoulas: of saying, " We want another couple of months, at least, 59 00:02:55,860 --> 00:02:58,079 Stephen Koukoulas: of confirmation before we're going to cut rates." So, he 60 00:02:58,079 --> 00:02:59,459 Stephen Koukoulas: said the next move is probably down. There's no more 61 00:02:59,459 --> 00:03:01,860 Stephen Koukoulas: rate hikes, but not yet. Don't get carried away. 62 00:03:02,340 --> 00:03:04,650 Sean Aylmer: Okay. Big week this week. We have the Reserve bank 63 00:03:04,650 --> 00:03:08,639 Sean Aylmer: coming out tomorrow with their interest rate decision, but it's 64 00:03:08,639 --> 00:03:10,350 Sean Aylmer: kind of a new world for the Reserve Bank. 65 00:03:11,040 --> 00:03:12,929 Stephen Koukoulas: It is. This is part of the reforms that the 66 00:03:12,929 --> 00:03:15,480 Stephen Koukoulas: government and Michelle Bullock, when she was appointed governor in 67 00:03:15,480 --> 00:03:20,820 Stephen Koukoulas: September last year, agreed to. That is more transparency, more information, 68 00:03:20,820 --> 00:03:24,780 Stephen Koukoulas: if you like. So tomorrow, 2: 30 Sydney time, they 69 00:03:24,780 --> 00:03:26,999 Stephen Koukoulas: will announce the interest rate decision, and it's an overwhelming 70 00:03:27,000 --> 00:03:30,990 Stephen Koukoulas: consensus. They're on haul. Yeah. They'll be happy with that 71 00:03:30,990 --> 00:03:33,750 Stephen Koukoulas: inflation outcome. They're not ready to cut, either. They're not 72 00:03:33,750 --> 00:03:36,389 Stephen Koukoulas: going to hike, so that's the easy call, what they 73 00:03:36,389 --> 00:03:40,080 Stephen Koukoulas: say'll be important. But, what's also happening? They'll be releasing, 74 00:03:40,080 --> 00:03:43,830 Stephen Koukoulas: simultaneously, their quarterly statement on monetary policy, which is that 75 00:03:43,830 --> 00:03:48,389 Stephen Koukoulas: fabulous 60, 70, 80 pages of analysis of the economy, which we 76 00:03:48,389 --> 00:03:52,230 Stephen Koukoulas: all love to pour over. And also, really importantly, she's 77 00:03:52,230 --> 00:03:54,870 Stephen Koukoulas: giving a press conference. So, there's a chance to ask 78 00:03:54,870 --> 00:03:58,200 Stephen Koukoulas: her about her call on rates in November last year, 79 00:03:58,200 --> 00:04:01,020 Stephen Koukoulas: what she's saying now. Yeah. How confident is she that 80 00:04:01,020 --> 00:04:03,630 Stephen Koukoulas: that inflation rate that we saw last week is going 81 00:04:03,630 --> 00:04:06,240 Stephen Koukoulas: to be confirmed in the following quarters? So, it's one 82 00:04:06,240 --> 00:04:08,580 Stephen Koukoulas: of these ones where, " Hooray." The US has been doing 83 00:04:08,580 --> 00:04:11,250 Stephen Koukoulas: this for quite a while. Here in Australia, we've now 84 00:04:11,250 --> 00:04:14,940 Stephen Koukoulas: got this situation where every meeting the governor will front 85 00:04:14,940 --> 00:04:18,210 Stephen Koukoulas: the press, not to grill it. It's not this sort 86 00:04:18,210 --> 00:04:20,099 Stephen Koukoulas: of gotcha sort of game. It's not like politics. It's to 87 00:04:20,099 --> 00:04:22,830 Stephen Koukoulas: sort of dig into what she's really thinking about the economy. 88 00:04:23,370 --> 00:04:25,380 Sean Aylmer: It'll be interesting because we'll get to know the governor 89 00:04:25,380 --> 00:04:28,619 Sean Aylmer: of the Reserve Bank better than we have traditionally. Philip 90 00:04:28,619 --> 00:04:31,140 Sean Aylmer: Lowe was more of a reserved chap. We probably didn't 91 00:04:31,140 --> 00:04:34,380 Sean Aylmer: know him so well. Glenn Stevens was even more reserved. 92 00:04:34,470 --> 00:04:37,260 Sean Aylmer: Ian Macfarlane was a little more out there. Michele Bullock 93 00:04:37,260 --> 00:04:41,520 Sean Aylmer: is more of this kind of upfront person. I think 94 00:04:41,910 --> 00:04:44,190 Sean Aylmer: she'll say it as she sees it. It'll be interesting. 95 00:04:45,029 --> 00:04:47,670 Stephen Koukoulas: She's already given a couple of speeches, where she's had Q& 96 00:04:47,910 --> 00:04:51,690 Stephen Koukoulas: A sessions, since she's become governor. And, yes. How can 97 00:04:51,690 --> 00:04:54,419 Stephen Koukoulas: I describe it? Her selling of the message is really 98 00:04:54,420 --> 00:04:57,659 Stephen Koukoulas: good. It's not necessarily whether we agree or disagree with it. 99 00:04:57,990 --> 00:05:02,040 Stephen Koukoulas: The thinking that the RBA has is really transparent with 100 00:05:02,040 --> 00:05:05,189 Stephen Koukoulas: her. The conversation about... Well, even things as obscure as 101 00:05:05,190 --> 00:05:07,320 Stephen Koukoulas: the use of cash, let alone what's happening to the 102 00:05:07,320 --> 00:05:09,000 Stephen Koukoulas: economy, inflation- 103 00:05:09,210 --> 00:05:09,210 Sean Aylmer: Yeah. 104 00:05:09,210 --> 00:05:11,640 Stephen Koukoulas: ... interest rates. When you ask her a question, she'll 105 00:05:11,640 --> 00:05:14,549 Stephen Koukoulas: answer it. She'll sort of outline the pros and cons 106 00:05:14,550 --> 00:05:17,099 Stephen Koukoulas: rather than the... Sort of go back to Alan Greenspan, " 107 00:05:17,670 --> 00:05:19,860 Stephen Koukoulas: If you can understand what I'm saying, I must've misspoken." 108 00:05:21,000 --> 00:05:26,190 Stephen Koukoulas: So, she actually tries to put the context into everyday 109 00:05:26,190 --> 00:05:28,680 Stephen Koukoulas: language. That's a really good thing because that transparency issue 110 00:05:28,680 --> 00:05:31,770 Stephen Koukoulas: was something that the RBA probably lost the plot a 111 00:05:31,770 --> 00:05:33,600 Stephen Koukoulas: bit in the last few years, anyway. 112 00:05:34,589 --> 00:05:37,799 Sean Aylmer: When's the next meeting after this one? Because I think 113 00:05:37,799 --> 00:05:40,169 Sean Aylmer: it's a longer gap. Isn't it? And, does that make 114 00:05:40,170 --> 00:05:42,150 Sean Aylmer: a difference when they're thinking about interest rates? 115 00:05:43,439 --> 00:05:48,480 Stephen Koukoulas: It may. The next one's on the 17th of March, coincidentally 116 00:05:48,480 --> 00:05:50,400 Stephen Koukoulas: just a day or two before that next Fed. And 117 00:05:50,400 --> 00:05:53,190 Stephen Koukoulas: then the one after, that's the 7th of May. Now, 118 00:05:53,339 --> 00:05:56,760 Stephen Koukoulas: the way that these are timed are to be approximately 119 00:05:57,570 --> 00:06:00,930 Stephen Koukoulas: 10 days after key events. Those key events are the 120 00:06:00,930 --> 00:06:05,070 Stephen Koukoulas: quarterly CPI, obviously, and the quarterly GDP numbers. They used 121 00:06:05,070 --> 00:06:07,109 Stephen Koukoulas: to meet the day before GDP numbers came out, so 122 00:06:07,110 --> 00:06:09,599 Stephen Koukoulas: that would've been a bit of a problem. So in 123 00:06:09,599 --> 00:06:12,660 Stephen Koukoulas: the 17th of March meeting, they'll have had the GDP 124 00:06:12,660 --> 00:06:16,289 Stephen Koukoulas: numbers come out roughly 10 days before, probably not going 125 00:06:16,289 --> 00:06:18,450 Stephen Koukoulas: to do anything yet because they don't have that inflation picture. 126 00:06:18,480 --> 00:06:20,760 Stephen Koukoulas: But, the 7th of May is where everyone's getting a 127 00:06:20,760 --> 00:06:24,810 Stephen Koukoulas: little excited now because they'll have the March quarter inflation 128 00:06:24,810 --> 00:06:27,389 Stephen Koukoulas: numbers. They'll know what the fed's doing a little more. 129 00:06:27,540 --> 00:06:29,549 Stephen Koukoulas: Of course, we still get the monthly run of labor 130 00:06:29,550 --> 00:06:31,650 Stephen Koukoulas: force and retail sales, and these sorts of things so 131 00:06:31,650 --> 00:06:34,440 Stephen Koukoulas: they'll have a lot more information. So the current betting, 132 00:06:34,440 --> 00:06:37,770 Stephen Koukoulas: if we can call it that, is May's a 50/ 50 133 00:06:37,770 --> 00:06:42,118 Stephen Koukoulas: proposition. End of June, yeah, that could well be the 134 00:06:42,120 --> 00:06:45,988 Stephen Koukoulas: one that they deliver. So, it's work in progress. There's 135 00:06:45,990 --> 00:06:48,238 Stephen Koukoulas: no more rate hikes. I think we're pretty confident about 136 00:06:48,240 --> 00:06:51,029 Stephen Koukoulas: that. Now, all the speculation that we'll be chatting about 137 00:06:51,029 --> 00:06:52,948 Stephen Koukoulas: for the next few weeks and next few months is, " 138 00:06:53,010 --> 00:06:54,659 Stephen Koukoulas: When's, that first rate cut coming?" 139 00:06:55,920 --> 00:06:57,178 Sean Aylmer: Yeah. It's going to be an exciting week. We're going 140 00:06:57,180 --> 00:06:59,880 Sean Aylmer: to see a Reserve Bank with personality. Oh, my gosh. 141 00:06:59,880 --> 00:07:01,020 Sean Aylmer: We haven't seen that for a long while. 142 00:07:01,021 --> 00:07:05,309 Stephen Koukoulas: I know. Won't it be good? And, I think the press are keen to do it. 143 00:07:05,460 --> 00:07:09,089 Stephen Koukoulas: The press, they're keen to sort of draw out the 144 00:07:09,089 --> 00:07:12,269 Stephen Koukoulas: discussion. In the olden days, like last year, you'd see 145 00:07:12,270 --> 00:07:15,870 Stephen Koukoulas: this statement come out, really beautifully written press release, or 146 00:07:15,870 --> 00:07:18,390 Stephen Koukoulas: statement on monetary policy. There was something that you wanted to 147 00:07:18,390 --> 00:07:19,650 Stephen Koukoulas: ask about, and you couldn't. 148 00:07:20,130 --> 00:07:20,190 Sean Aylmer: Yeah. 149 00:07:20,190 --> 00:07:20,340 Stephen Koukoulas: Now, we can. 150 00:07:20,340 --> 00:07:23,519 Sean Aylmer: Yeah. Well, good luck to Michelle Bullock when she fronts 151 00:07:23,520 --> 00:07:25,320 Sean Aylmer: the media tomorrow. Stephen, have a great week. 152 00:07:25,860 --> 00:07:26,639 Stephen Koukoulas: Thank you, Sean. See you. 153 00:07:27,270 --> 00:07:29,699 Sean Aylmer: That was economist Stephen Koukoulas, better known as The Kouk. 154 00:07:29,699 --> 00:07:31,800 Sean Aylmer: You can find him at thekouk. com and follow him 155 00:07:31,800 --> 00:07:34,800 Sean Aylmer: on X using the handle @ TheKouk. I'm Sean Aylmer, and this is 156 00:07:34,800 --> 00:07:36,090 Sean Aylmer: Fear and Greed - The Week Ahead.