Good morning, and welcome to the ABC’s finance blog. I’ll be guiding you through the latest market action for the next few hours.
Locally, the “big news” today will probably be the latest inflation figures, covering the month of May.
During that period, oil prices fell sharply on expectations that the US and Iran would soon sign some kind of agreement to de-escalate their months-long war and reopen the Strait of Hormuz.
The Reserve Bank will no doubt be scrutinising these figures to decide whether to keep interest rates on hold — or announce a fourth interest rate hike by the end of this year. It’s the only thing the RBA can really do to try to slow down the recent cost-of-living increases.
Here’s what economists are expecting, according to a poll conducted by Reuters:
- Inflation could rise by 4.3% in the year to May — the median result of that survey
- This would be a slight increase over the previous month’s result of 4.2%, and well above the RBA’s inflation target range of 2.5%.
However, the monthly result will be interesting because:
- Inflation is estimated to have fallen by 0.4% since the previous month (April). So essentially, that’s deflation!
- However, there is a big disparity in the poll, with economists’ predictions ranging from a 0.8% drop to a 0.2% rise in monthly inflation.
- The Albanese government’s temporary 50% fuel excise discount, which amounts to roughly a 32-cent-per-litre reduction, is likely to be a major reason if we see monthly deflation in May.
The cut to the fuel excise was due to expire by June 30, but the government has extended it until August 2 — albeit at a lower discount (25%), which amounts to a 16-cent-per-litre reduction in petrol and diesel.
Anyway, sit back, grab a coffee (or tea), and I’ll be back with more updates shortly!
