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

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Speaker 1: and as always I'm joined by economists seven coculas. You'll

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Speaker 1: find him at the Cook dot com, t h e

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Speaker 1: k O UK dot com and on X using the

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Speaker 1: handle the Kirk Stephen.

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

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Speaker 2: an amazing week last week and with another amazing week

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Speaker 2: about to hit us.

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Speaker 1: What a cracking week we had last week. We had

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Speaker 1: inflation figures, we had the US FED, we had retail trade,

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Speaker 1: we had building approvals, and we also had home prices.

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Speaker 1: Where do we start with all that? I faced the

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Speaker 1: big one or the big two that we really want

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Speaker 1: to discuss mostly CPI here and what the Fed said.

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Speaker 2: Yeah, CPI here was pretty much on expectations. But and

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Speaker 2: it's really important, but the market was fearing that it

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Speaker 2: would be higher, that it would be worse, that inflation

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Speaker 2: would be even stickier than it currently is. So in

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Speaker 2: a way, the fact that it wasn't any worse, and

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Speaker 2: it was broadly as the RBA had been forecasting to

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Speaker 2: the last couple of quarters. Three point eight for the headline,

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Speaker 2: figure three point nine for the trim demean measure and

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Speaker 2: annual terms, and the market rally, The bond market rallied

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Speaker 2: like crazy, So we had yields dropping, you know, twenty

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Speaker 2: twenty five basis points on the basis of that result.

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Speaker 2: Then we had the FED come out and while they

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Speaker 2: were cautious in their dubbishness, you know, Jerome Powell, the

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Speaker 2: FED chairperson, indicated quite clearly that there's probably going to

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Speaker 2: be a rate cut on the agenda at their September meeting.

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Speaker 2: We just need to see, you know, the next round

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Speaker 2: of inflation data, the next round of activity data to

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Speaker 2: come out to sort of lock that in. But the

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Speaker 2: market's got about a one hundred percent chance that the

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Speaker 2: Fed's going to be cutting twenty five basis points in

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Speaker 2: the middle of September.

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Speaker 1: Pretty incredible, and of course that led to share market

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Speaker 1: rallies both in the US and here in Australia.

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Speaker 2: Yep, gold gold, gold record highs the AX, you know,

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Speaker 2: eighty one hundred points. You know, that's we finally got there.

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Speaker 2: That eight thousand had been elusive for well, frankly years.

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Speaker 2: We'd got to the high seven thousands down, a high

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Speaker 2: seven thousands down. We rocketed through that, and I think

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Speaker 2: that's partly linked to a couple of things that interest

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Speaker 2: rate question. So the relief, I suppose that the probability

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Speaker 2: of a raid hike is now in Australia effectively zero

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Speaker 2: for all intents and purposes. So that's encouraged investors to

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Speaker 2: step into the share market, particularly banks. My goodness. Yeah,

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Speaker 2: the bank share prices when I look at them and

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Speaker 2: any sort of long time series, they're booming. Gosh. I

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Speaker 2: who'd have thought Australia's relatively conservative banks would be yielding

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Speaker 2: and growing like that. But it's a wealth effect. And

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Speaker 2: you know, we also had just by the way, last

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Speaker 2: week we had the Core Logic house price data house

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Speaker 2: prices at a record high. So if you've got a

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Speaker 2: bit of money in super and a bit of money

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Speaker 2: in the stock market, if you own your own property,

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Speaker 2: you've made an absolute mozza in the last little while

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Speaker 2: with the rally and.

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Speaker 1: Ass Now, Stephen, this is the big week coming up though.

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Speaker 1: This is what it's all about. Michelle Bullock and friends

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Speaker 1: get to talk about interest rates. What are they going

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Speaker 1: to do? What are they going to say? I think

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Speaker 1: we know what they're going to do, But what do

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Speaker 1: you think they're going to say?

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Speaker 2: Yeah, you're quite right, about a zero point zero percent

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Speaker 2: probability of a eight move in either direction, and up

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Speaker 2: until the inflation numbers last week, there was about a

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Speaker 2: twenty percent chance of a hike. So that's now gone

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Speaker 2: and it's basically nothing, and you're quite right. So the

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Speaker 2: RBA's got a messaging story to get out there, and

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Speaker 2: we don't know quite what it is because we haven't

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Speaker 2: heard from Michelle Bullock for quite a few weeks. Andrew Houses,

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Speaker 2: the Deputy Governor, gave a speech, but that was sort

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Speaker 2: of three or four weeks ago before all this really

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Speaker 2: important news has come out. So my hunch, it is

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Speaker 2: only a hunch, is that they will probably endorse the

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Speaker 2: market and say, look, we probably don't have to hike

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Speaker 2: interest rates because we know that growth is week and

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Speaker 2: again last week we had the very soggy retail sales

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Speaker 2: numbers for the June quarter. So June quarter, when we

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Speaker 2: get that in about a month's time, will be pretty weak.

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Speaker 2: We know that, we know the unemployment rate is increasing.

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Speaker 2: We know, as we're just saying, the fen's probably going

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Speaker 2: to be cutting rates, joining a whole bunch of other

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Speaker 2: central banks to a cutting rates. So the message from

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Speaker 2: the ABA and from Michelle Bullock will be Look, we

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Speaker 2: are happy that inflation was no worse than expected. We

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Speaker 2: are acknowledging that economic growth is slowing. We are looking

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Speaker 2: at global economic events and seeing soft growth, a dip

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Speaker 2: in inflation, the easing bias of all these central banks

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Speaker 2: around the world, and while we're not ready to cut,

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Speaker 2: we've got a slightly dubbish bias towards cutting interest rates,

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Speaker 2: but not yet.

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Speaker 1: M Do you think she'll be relieved on mindow CPI?

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Speaker 1: I think is last week. Did you think it be relieved?

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Speaker 2: The short answers, Yes. I think they didn't want to

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Speaker 2: high grates. They made that very clear that they didn't

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Speaker 2: want to hike rates because they could see the activity

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Speaker 2: indicators being weak and a high inflation result. Had we

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Speaker 2: had an ex extra point two or point three on

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Speaker 2: those CPI numbers would have created a real dilemma for them.

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Speaker 2: It would have been a very awkward message for them

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Speaker 2: to say, we're not hiking interst rates even though you know,

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Speaker 2: headline inflation's at four point something. Trim means at four

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Speaker 2: point something. The fact that it's just got that nose

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Speaker 2: below four percent is a sign that they can now

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Speaker 2: craft the messaging and breathe a sigh of relief, announce

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Speaker 2: no change, give the press conference, which Michelle Bullock's done

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Speaker 2: brilliantly since she's introduced those. In the last six months

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Speaker 2: or so, they put out their quarterly statement of monetary policy. So,

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Speaker 2: as you said, it's not what they do, it's what

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Speaker 2: they say and what they write. So a lot of

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Speaker 2: US economists will be pouring over the sixty or seventy

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Speaker 2: pages of the quarterly statement, looking at their forecasts and

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Speaker 2: watching what have they revised. Are they advising unemployment up

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Speaker 2: a bit? Are they advising inflation down a bit? Because

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Speaker 2: that will be the true signal of their intentions.

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Speaker 1: Yeah, I mean, just finally, the Reserve Bank has been

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Speaker 1: criticized for its forecasting over recent years, heavily criticized, though

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Speaker 1: at least at the moment when it comes to inflation,

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Speaker 1: it seems to be pretty much on track, or at

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Speaker 1: least in line with what the Reserve Bank thought.

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Speaker 2: Oh indeed, and they deserve a tick. So for the

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Speaker 2: last i'd put it roughly twelve months. I'd have to

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Speaker 2: check their statement on Montrey policy from August last year,

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Speaker 2: so a year ago, but I think they've pretty much

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Speaker 2: got that unemployment drifting up to four percent, four and

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Speaker 2: a little bit percent, and there's currently four point one percent,

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Speaker 2: so tick, they've got inflation falling a little bit below

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Speaker 2: four percent tick GDP there. Well, we'll wait and see

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Speaker 2: what the grem court of GDP numbers are. They're probably

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Speaker 2: a little optimistic. But you know, in broad terms, when

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Speaker 2: your forecasts are only a couple of tenths out, that's

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Speaker 2: a mighty accurate forecast because there's revisions, there's shocks, there's

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Speaker 2: sort of global events and other things that can impact

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Speaker 2: on your GDP fork. So you know, having had a troublesome,

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Speaker 2: problematic couple of years, and that was remember during the

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Speaker 2: aftermath of the pandemic, so forecasting in that environment was

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Speaker 2: impossible to do well. Now that we've returned to the

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Speaker 2: post pandemic economics, if that's the right description, they're getting

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Speaker 2: it pretty right. So we'll be paying, as I said,

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Speaker 2: a lot of attention to those forecasts and benchmarking them

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Speaker 2: against what the market sector thing about inflation, unemployment, and

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Speaker 2: interest rate settings.

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Speaker 1: Stephen, enjoy your week, we'll do, Sean.

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Speaker 2: Thank you.

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Speaker 1: That was economist Stephen coucurlis better known as the Kirky.

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Speaker 1: You can find him at the cook dot com and

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Speaker 1: follow him on X using the handle the kirk. I'mb

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Speaker 1: Sean Almer, and this is fear and greed, the weak

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Speaker 1: ahead