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No Cup Day cut as RBA holds fire amid rising inflation
The Melbourne Cup may be the horse race that stops a nation, but tomorrow’s glamour event on Australia's racing calendar is unlikely to coincide with a much anticipated Reserve Bank (RBA) interest rate cut following revelations that the inflation genie has not been adequately corked. What’s likely to have taken a rate cut well out of contention is the revelation that inflation for the September quarter was up 1.3%, taking annual inflation to 3.2%. According to the ABS, this is the largest rise since March 2023, with electricity the greatest contributor at 9%. While food and non-alcoholic beverages annual inflation was 3.1% for the September quarter, other rises include housing at 2.5%, recreation and culture at 1.9% and transport at 1.2%.Trimmed mean and CPI upWhat’s more meaningful for the RBA board is the trimmed mean – a measure of underlying inflation - which was also up by 3%, from 2.7% for the June quarter. This is the first time the trimmed mean annual inflation has increased since December 2022. What will also play on the minds of the RBA monetary policy board when it meets tomorrow will be the September 2025 monthly CPI indicator, which rose 3.5% in the 12 months to September, up from 3% in the 12 months
Outlook
Scope Ratings downgrades US credit amid fiscal concerns
Citing Washington’s drawn-out budget standoff, ongoing fiscal deterioration and declining governance standards, European credit rating agency Scope Ratings has downgraded America’s credit rating by one notch. The Berlin-based agency has cut both the United States local and foreign currency long-term issuer and senior unsecured debt ratings from AA to AA-, two notches lower than those assigned by the biggest peers, Fitch, Moody’s, and S&P Global. The downgrade follows the partial U.S. government shutdown on October 1, triggered when lawmakers failed to reach a funding agreement before the 30 September end of the fiscal year. But well before the government shutdown, the U.S. had already been struggling to maintain its high credit rating. The decision by Moody’s to downgrade in May this year saw the country lose its last remaining top credit score among the big three rating firms. Moody lowered the U.S. credit assessment to Aa1 from Aaa, matching Fitch and S&P Global in placing it below the top-tier triple-A category. At the time of Moody’s downgrade, the rating agency attributed the change to its deepening concern over the nation’s ballooning debt and deficits. “While we recognise the US’s significant economic
Outlook
Powell hints at end to balance sheet runoff
Federal Reserve (Fed) Chair Jerome Powell revealed to the market yesterday that the central bank is on the cusp of ceasing to reduce the size of its bond holdings and gave clearer hints about the likelihood of more interest rate cuts. Offering clarity on where the Fed sits on quantitative tightening - to reduce the more than US$6 trillion of securities it holds on its balance sheet – Powell indicated that the Fed is nearing its goal of “ample” reserves available for banks. While the central bank chief did not provide specific guidance on a path lower, his comments about weakness in the labour market suggest easing is firmly on the table. “Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” said Powell. “We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision.” Taking a Goldilocks ‘just right‘ approach, Powell told delegates to a National Association for Business Economics conference in Philadelphia yesterday that while moving too quickly may leave the inflation job unfinished, by moving too slowly, there may be unnecessary and painful losses in the empl
Outlook
US government shutdown set to cost $15bn per week
United States Treasury Secretary Scott Bessent said the two-week federal government shutdown is costing the U.S. economy around US$15 billion (A$23.03 billion) a week in lost output. During the news conference, Bessent said the shutdown was beginning to “cut into muscle” of the U.S. economy and urged Democrats to “be heroes” and side with Republicans to end it. Analysts have projected a hit to quarterly growth of roughly 0.2% points per week, which would amount to around US$15 billion, and much of it would be made up after the shutdown ends when federal workers typically receive payback. However, this shutdown of the Trump administration is threatening unprecedented action like denying backpay and permanent firings. Recently, a federal judge in San Francisco ordered the Trump administration to halt its efforts to lay off roughly 4,100 federal workers after President Donald Trump threatened 10,000 layoffs during the shutdown. The S&P Global Market estimated that the unemployment rate could rise to as much as 4.8% if the shutdown continues until 18 October, which would be a significant jump from 4.3%. The White House Council of Economic Advisers also estimated that a month-long shutdown could lead to the loss of US
Outlook
IMF lifts growth outlook, flags China as trade war looms
While the International Monetary Fund raised its 2025 global growth forecast after concluding that shocks and financial conditions are more benign than expected, the global lender fears a renewed U.S.-China trade war could significantly staunch output. What prompted the IMF’s second growth upgrade since April was a recognition that recent trade deals between the U.S. and some major economies have avoided the worst of U.S. President Donald Trump's threatened tariffs with little in the way of reprisal. While global growth projections in the latest World Economic Outlook (WEO) are revised upward relative to the April 2025 WEO, they continue to mark a downward revision relative to the pre-policy-shift forecasts. The IMF now predicts global real GDP growth at 3.2% for 2025, up from a July forecast of 3.0% and a more severe April forecast of 2.8% after Trump’s broad global "reciprocal" tariffs resulted in a tit-for-tat escalation with China. A year later (2026), the IMF is forecasting 3.1% global growth - unchanged from the July forecast - with advanced economies growing around 1.5% with emerging and developing economies sitting just above 4%. Lower-than-expected tariff rates aside, what’s also underpinning the IMF’s

Outlook
Lurking catalysts could disrupt calm in global markets
While the third quarter of 2025 delivered strong performance across global asset markets, with the United States leading the way in economic growth, there’s mounting uncertainty over the durability of this expansion and what it means for investors. At face value macroeconomic data continues to paint a solid picture, with jobless claims remaining low, core capital goods orders having increased, and second quarter GDP revised upward to an annualised rate of 3.8% - due largely to spending by U.S. consumers. However, despite this momentum, U.S. labour markets remain soft which has created a disconnect between output and employment. There’s also growing fear that while consumer spending has been propped up by wealth gains and lower saving rates, it will start falling away due to rising inflation and weakening labour income. Adding to these concerns, the U.S. central bank’s monthly Survey of Consumer Expectations found that fewer U.S. consumers expect their households’ financial situations to be better off a year from now.Outlook for sharesWhile shares remain strong, Shane Oliver chief economist with AMP believes the risk of a correction remains high given stretched valuations and numerous potential triggers around: Slowing
Outlook
Historic Fed meeting as Miran appointed, Cook survives
The Federal Reserve delivered a widely expected interest rate cut on Wednesday, 17 September, 2025, lowering its benchmark rate by 25 basis points to a range of 4.00% to 4.25%. While the move was anticipated by markets, the surrounding circumstances made this meeting one of the most historic and politically charged in decades. Newly confirmed Governor Stephen Miran, appointed by President Donald Trump just one day earlier, was the lone dissenter, pressing for a more aggressive half-point cut. Meanwhile, Governor Lisa Cook participated in the deliberations despite ongoing legal battles over Trump’s attempt to remove her. The meeting showcased not only diverging economic views inside the Fed but also underscored the growing political pressure on America’s central bank.A Cut Expected, but Clouds Over the Path AheadMarkets had largely priced in the Fed’s decision, with futures assigning more than a 90% probability to a quarter-point reduction. Yet the bigger question was what happens next. The Fed’s updated “dot plot” projections suggested two more cuts before the end of the year, bringing the policy rate closer to what officials view as a neutral level of 3%. However, the path beyond remains murky. Some policymakers
Outlook
Australia’s safe haven status attracts global capital
Australia’s growing appeal to investors as a stable democracy with sound economic fundamentals is being reflected in enhanced capital flows from around the world, which has helped drive the Aussie dollar higher against the greenback, up 11% since an early April low. Given that global investors don’t just cut and run out of a country, capital allocation decisions typically are not made quickly. However, there’s been a noticeable pick-up in offshore demand for Australian assets, especially fixed income, in the last couple of months. While initial waves of capital redeployment start with a bond maturity or a sale of equities in another country, they typically spread to less liquid real assets such as infrastructure and property. According to National Australia Bank’s chief economist Sally Auld, global asset allocators are comparing Australia’s outlook for trend growth, low inflation, full employment and central bank independence favourably against the less appealing credentials of other advanced economies. As a case in point, inflation is above target and growth is slowing in the U.S.; the same thing is happening in the UK, while the German economy hasn’t grown in five-and-a-half years. “If I was sitting offshore wi
Outlook
Powell warns on inflation, jobs; Fed split on rate cuts
Federal Reserve Chair Jerome Powell said on Tuesday the central bank must continue weighing the twin challenges of high inflation and a cooling labour market as policymakers debate how quickly to cut interest rates. “Near-term risks to inflation are tilted to the upside and risks to employment to the downside – a challenging situation,” Powell said, sticking closely to the language used last week when the Fed reduced its benchmark rate by a quarter point. The federal funds rate, now at 4% to 4.25%, remains restrictive enough to keep pressure on inflation, but leaves the Fed well positioned to respond to potential economic developments. "Our policy is not on a preset course,” Powell said. While that phrase is a familiar refrain among central bankers, it has taken on added weight as divisions within the Fed widen. Earlier on Tuesday, Fed Vice Chair for Supervision Michelle Bowman argued for quicker and more decisive easing to protect a labour market she fears could deteriorate further. “It’s a lot easier to support the labor market by lowering the federal funds rate than it is to fix it after it’s broken,” she said. With the unemployment rate at 4.3%, Bowman said slowing hiring was enough to justify action. “It is