The ASX rallied today 0.9% on lower-than-normal volume, with the materials sector up 1.7% on the back of strong gold, copper and green metal prices.
Ten out of 11 sectors were higher, led by Real Estate, which was up 1.89%.
Inflation points in the wrong direction
There is no soft landing for Australians hoping for an easing of the cash rate any time soon.
ABS data showed that the consumer price index (CPI) rose 7.3% over the year to November, back to 32-year highs following a cooler 6.9% in October.
There were notable price hikes across essentials like housing and groceries, along with travel, wages and electricity.
Food and non-alcoholic beverages rose an eye-watering 9.4%, driven by dining out and takeaway, while the return of the fuel excise in September last year was also showing up in these latest figures.
Fuel prices peaked at the $2 mark in early November before dropping to just under $1.80 by month’s end. This put the squeeze on travel at a time when many were planning or paying for it.
The new figures – part of a rolling monthly data set from the ABS that will see its next instalment just before the RBA meets again in two weeks – increase the likelihood of further rate rises well into 2023.
Some economists tip that the cash rate will be pushing 4% and beyond over the next few months.
Over in New York, Federal Reserve chairman Jerome Powell continued his hawkish line on inflation during his first speech of the year on Tuesday.
He acknowledged that the stance was not popular but maintained it was necessary.
“Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time,” he said.
“But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”
“The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.”
In Europe and the UK, inflation continued to be a central concern. While it eased during November and December, the figure was still running at 9.2%, with ECB president Christine Lagarde warning, like her US counterpart, that rates would have to climb, with the kicker that:
“If you compare with the Fed, we have more ground to cover. We have longer to go.”
In the UK, despite fears of a recession and recent energy price drops, inflation is still at levels not seen for decades and is not about to change course.
Rents grow, albeit more slowly
Rental values grew 2.3% in the December quarter, down from 2.7% in the previous quarter.
Perth powered ahead, with a monthly growth of 1.2% and 3.2% over the quarter. The western capital has seen the cost of renting grow 11.2% over the past year, with the average rental now costing $553 per week.
While the pace of increases has slowed since last year, when the median rent jumped 10.2% to $555 per week, the squeeze is still on for renters, with landlords passing on the costs of rate increases – a situation that is unlikely to ease any time soon.
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