观点

The 5yr part of the curve is de-richening (cheapening) also, which points to an increased worry on the rate hike risk.

We are far more constructive on inflation, and its path lower through 2027, and without the need for hikes.

He also made reference to strong capex growth related to AI, noted low credit spreads and strong issuance, and that commercial and loans markets were buoyant; emphasising that monetary conditions are not restrictive.

We expect the Reserve Bank of New Zealand to increase its overnight cash rate (OCR) by 25bp to 2.75% on 2 September.

We also think they will retain a bias for more tightening, but the bar to match markets' very hawkish expectations for the next year is set high.

There is also a risk that not all RBNZ members are equally convinced by the case for further tightening, leading to a more nuanced and less hawkish message.

Our call for the RBNZ is for two more hikes. One at this September meeting, and another either at the December or February meeting.

For FX, we see downside risks for the NZD around this meeting, given the high hurdle for the RBNZ to validate market pricing.

Further out, we still think a repricing of dovish Fed expectations, even after Warsh’s hawkish Jackson Hole speech, can lift NZD/USD into year-end.

Taken together, the data fully support a September hike and argue for retaining a hawkish bias.

The business outlook also continues to improve, with the composite confidence index rising for a fourth consecutive month to 96.9, its highest level since April.

Notwithstanding a modest monthly gain in August, confidence in manufacturing reached 89.9, the highest level since June 2023.

Confidence in market services came in at 99.5 (from 98.2 in July), reaching the highest level since March, driven by gains in transport and storage and, even more markedly, in tourism.

The fairly volatile construction sector data recorded a rebound in August, which more than compensated the sharp July fall.

It seems that the long-lasting heatwave, which hit many Italian seaside spots, had no negative impact whatsoever on tourism activity, a relevant value-added generator for the Italian economy.

The registered unemployment rate is forecast to stand at 6.0% at the end of 2027, compared with our projection of 5.9%.

At first glance, projected gross borrowing needs for 2027 compare favourably with the expected 2026 outturn. While the details of the draft budget have yet to be released, we assume this largely reflects the timing of EU fund disbursements.

The draft budget embraces fiscally neutral changes to direct taxes that were announced previously.

In light of the planned personal income tax changes for next year, it would not be surprising if gross minimum wages were to rise by a much smaller low single-digit percentage than we have become accustomed to in recent years.

However, geopolitical risks and changes in domestic economic policy continue to dampen business optimism.

Following the disappointing retail performance in June, we are expecting a rebound. This will be partly due to the effect of the FIFA World Cup which boosted both food and non-food retail.

Against this backdrop, we continue to recommend that long-term investors keep diversification at the center of their portfolios.

over the medium term, our view of a weaker USD remains intact.

However, suppressing the term premium on the long end would risk a drop in demand for Treasurys — potentially adding to USD weakness.

These include the strong foreign equity inflows into the US

some re-establishment of FX carry trades since the start of August

Inflationary pressures remain very subdued across other categories: goods inflation stood at -0.4%, services inflation at 2.0%, and food inflation at 1.1%.

Markets appear to have taken these remarks as his intended signal that a discussion about a policy rate hike is clearly on the table for the September meeting.

Market consensus expects industrial production growth to moderate to 3.5% YoY, down from 4.9%.

If Warsh underestimates the mood at the long-end of the market and 30-year Treasury yields spike back towards 5.30%, higher volatility will see higher-yielding carry currencies underperform and probably CHF start to outperform again as it did briefly last week.

A broad allocation to commodities can provide an additional source of long-term returns and potentially help protect portfolios during periods when rising inflation expectations challenge both equities and bonds.

Marvell secured a major custom-chip agreement with Google, but management said the biggest contribution should arrive later, particularly from fiscal 2029.

Revenue reached 2.48 billion USD, up about 42%, while management raised its outlook and pointed to AI-driven complexity.

Custom-chip projects can take years to scale.

Software companies may own valuable data without successfully charging more for AI access.

Watch delayed production ramps, weak AI-related contract growth and rising usage that fails to become recurring revenue.

Nvidia's chief financial officer forecast approximately 70% revenue growth in the fiscal year ending January 2028, allaying concerns about the durability of the AI spending cycle.

The strong July monthly CPI does raise the chance of an RBA hike in November. But we do not think this one data point is enough to rush all the way to the other side of boat and lock in a hike.

The timing of the September meeting is awkward for policymakers considering an early hike. The August CPI is released the following day.

But one monthly CPI print is not enough evidence to price in a hike fully.

If the RBA does raise the cash rate in the near term, it would more of an insurance hike, reflecting unease about a slow pace of return of inflation to target.

Whatever the next few meetings bring, split decisions are a distinct possibility.

A September hike would certainly involve dissents. Depending on Q3 inflation and the rest of the data flow between now and then, a November hike could easily involve a split vote as well.

When we last updated our rates view on 29 July, we said that the risk of a rate hike in November could not be ruled out, but it was no longer the base case.

while this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved

Warsh remains deeply critical of forward guidance particularly the sort used during the financial crisis and during COVID. He argues that deterministic, pre-committed guidance leads to policy errors once the economy normalizes as occurred after COVID.

He argues that forecast-based guidance works “better in the lab than in the field” . For example, he notes that FOMC members consistently forecasted inflation would return to 2% despite signs it wasn’t after COVID.

Instead, he believes policy should be guided by a set of “key principles” . This means putting more emphasis on “trends” rather than “isolated data”. Policy is implemented through changes in short-term interest rates; rather than QE.

Price stability is defined by the PCE index – although in his discussion of current conditions he noted other measures including the dispersion of prices within the CP as well as commodities. That said, he thinks wages are less helpful for predicting inflation. Finally, he argues that “we should pay attention to money created by the central bank” . We think this is an oblique reference to the size of the Fed’s balance sheet.

Buy the 10y on dips in early September, or as and when the ACM term premium is above 80bp.