ASX set to edge lower on RBA day as Wall Street drifts
The S&P 500 fell 0.1 per cent and is just below its all-time high set two weeks ago. The Dow Jones was down 171 points, or 0.4 per cent, and the Nasdaq composite fell 0.1 per cent, coming off its own record.
Wall Street is bracing for the next inflation update. Credit: Bloomberg
The Australian sharemarket is set to slip, with futures at pointing to a fall of 12 points, or 0.1 per cent at the open. The ASX added 0.3 per cent on Monday. The Australian dollar was 0.1 per cent lower at US65.12¢ at 5.12am AEST.
Reporting season continues, with Seven West Media among the companies due up on Tuesday. The Reserve Bank is expected to announce an interest rate cut at 2.30pm AEST on Tuesday afternoon.
The highlight of this week for Wall Street is likely to arrive on Tuesday, when the government will report how bad inflation was across the country in July. Economists expect it to show U.S. consumers had to pay prices for groceries, petrol and other costs of living that were 2.8 per cent higher in July from a year earlier, a slight acceleration from June's 2.7 per cent inflation.
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Inflation has remained above 2 per cent, even if it has improved substantially from its peak above 9 per cent three years ago. And the worry is that President Donald Trump's tariffs could push it higher.
That in turn is raising fears about a potential, worst-case scenario called 'stagflation' where the economy stagnates but inflation remains high. The Federal Reserve has no good tool to fix both at once, and it would need to concentrate on either the job market or inflation first. But helping one of those areas by moving interest rates would likely hurt the other.
A top Fed official, Michelle Bowman, said on Saturday that she believes the job market is the bigger concern. She is still backing three cuts to interest rates by the Fed this year following this month's stunning, weaker-than-expected report on the U.S. job market. Trump himself has also been angrily calling for cuts to interest rates to support the economy.
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