State Street Investment Management APAC economist Krishna Bhimavarapu suggests that the Reserve Bank of Australia (RBA) will likely maintain its extended hold on interest rates following a surprise October inflation print of 3.8 per cent. State Street provides investment management services and conducts investment research and trading across multiple asset classes and markets. The firm serves a diverse range of institutional investors.
Bhimavarapu noted that electricity prices significantly contributed to the upward CPI surprise due to the timing of household rebate usage. He also expressed concern over unexpectedly firm rental prices, which remained flat instead of declining as anticipated, highlighting persistent inflationary pressures in the housing sector.
The economist stated that today’s inflation data strengthens the expectation that the RBA will keep rates on hold. However, he also pointed to a sharp downside surprise in Q3 construction work completed, which could negatively impact GDP growth. This introduces a counterpoint to the current inflation narrative.
Bhimavarapu added that the impact of reduced engineering work could be offset if residential building activity increases. The construction data introduces a conflicting signal amid ongoing inflation concerns, potentially influencing future monetary policy considerations.
