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We got the latest CPI inflation read for Australia today, and it came in hotter than expected at 3.8% in the 12mth to December CY2025; trimmed mean or core inflation is lower, too, at 3.3% but still sticky, and outside the target band.
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So what does that mean for us investors? Well, it’s looking like Australia is going to take one big backwards step and raise interest rates again in response to a surprise uptick in inflation, and despite that, the ASX200 only fell two-tenths of a percent after the news heading into the second hour of arvo trades.
But that may be because this was priced in; that the RBA would likely need to hike once more has been a reality since October, and it nearly cost us a Santa Rally.
Still, the mood remains positive Down Under. BHP (ASX:BHP) hit a record today at $50.80 a share intraday, and a commodity rally is well underway, evidenced by the fact silver ETFs are more popular than NVIDIA right now.
So I expect the ASX to shrug off this CPI data, at least this week, ahead of that incoming hike decision, but there is one big catalyst that could produce downside risk coming from overseas. The U.S. Fed is set to meet tonight (American time) and make its decision, which will probably be a pause over there.
That may put Jerome Powell back in Donald Trump’s spotlight, and may then lead to any kind of commentary on Federal Reserve stability, which could rattle Wall Street, especially after clocking fresh records on its Tuesday session. Or at least, that’s one feasible way downside risk could emerge; in terms of business as usual, investors will be closely watching for hints on future cuts.
Looking around the traps, BHP at record levels as the everything rally surges on, while Commonwealth Bank (ASX:CBA) is in the green, though less bullish, only up one tenth. Coles (ASX:COL) down nearly -2% after a steep decline out the gate on Wednesday and then a second wave of selling pared slight gains spurred by inflation data; Woolworths (ASX:WOW) doing the same. BENZ Mining Corp (ASX:BNZ), meanwhile, is the best performer intraday as a gold discovery pushed it +20% higher.
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