Australian Inflation Has Reached A 32-year High Triggering A Rate Hike

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The 7.3% increase in consumer prices year on year is three times the rate of wage growth.

Most Asian stock markets extended gains on Wednesday amid growing expectations of a less hawkish Federal Reserve. As inflation reached a 32-year high, Australian stocks lagged, indicating more economic ructions.

Broader Asian markets rallied despite a dismal start on Wall Street. In Japan, the Nikkei 225 index rose 0.8%, led by gains in the shares of technology and industrial firms, while Malaysian stocks led advances in Southeast Asia, increasing 0.5%.

Hong Kong and Chinese stocks led the day’s performance, as they rebounded more following a strong sell-off earlier this week. The Hang Seng index in Hong Kong rose 2% from a 13-year low, while China’s blue-chip Shanghai Shenzhen CSI 300 index rose 1.4%.

However, both indices were trading much lower for the week, owing to fears about China’s political climate and sluggish economic development. Sentiment in risky markets rose as expectations grew that harm to the US economy would force the Federal Reserve to modify its hawkish approach.

Australian Prime Minister Anthony Albanese criticised the conservative coalition for failing to plan for an increase in power prices.

“Cheaper power bills will come as a result of investment in cheaper energy,” he said to the Australian Broadcasting Corporation.

Markets are still pricing in a 75 basis point increase in November. However, the odds of the central bank raising interest rates gradually in December are increasing.

This week, a slew of disappointing economic data from the United States fanned concerns about a possible turn. The focus now shifts to the third quarter of the United States. GDP figures, anticipated later this week, will provide more insight into the world’s largest economy.

The Federal Reserve’s fast interest rate hikes weighed heavily on Asian markets this year, as higher yields and constrained liquidity dampened investor appetite for risky assets.

Yahoo Finance stated, “This trend is likely expected to continue in the near-term, given that even if the Fed softens its hawkish stance, interest rates are already at their highest level since the 2008 financial crisis.”

On Wednesday, Australian equities lagged behind their peers, with the S& P/ASX 200 index advancing only 0.2%.

Coles Group (ASX: COL), the country’s second-largest grocery operator, saw its shares fall nearly 3% after it warned of increased cost pressures due to high inflation and lousy weather.

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