Japan Is Different This Time, Franklin Templeton Says

Members commenced their discussion of the global economy by observing that headline inflation had continued to ease in year-ended terms in most economies because food and energy commodity prices were generally lower than they had been a year earlier. More recent increases in some food and energy prices presented upside risks to headline inflation in the months ahead. Nevertheless, many central banks in advanced economies expected inflation to moderate further and return to target during 2025. Members noted that core inflation remained more persistent than headline inflation in advanced economies, though it had eased in many owing in part to a decline in core goods price inflation. By contrast, core services inflation remained high in most advanced economies, supported by the recent strength in demand relative to supply and strong growth in unit labour costs. Labour market conditions had eased gradually but remained tight, and unemployment rates were still at very low levels. Economic growth in advanced economies had slowed in response to cost-of-living pressures and tighter monetary policy, but by less than previously expected. Growth in household consumption had slowed in the June quarter in many advanced economies and timely indicators suggested the slowing had continued into the September quarter. Business investment growth had picked up in recent quarters in a number of advanced economies. Activity in the services sector – which had been a key driver of growth in economic activity in the first half of 2023 – appeared to have lost some momentum in preceding months. Members discussed recent developments in China, observing that conditions in the property market had deteriorated further and that other indicators of economic activity had remained soft. Chinese authorities had introduced several policy measures to support the property sector, but these had not yet materially chan tweet: *RBA: Considered Rate Hike, but Decided Pause Case Was Stronger *RBA: Determined to Return CPI to Target in Reasonable Timeframe *RBA Monitoring Global Economy, Household Spending, CPI, Jobs *RBA: Downside Risks to the Chinese Economy Had Increased tweet: RBA SAYS SOME FURTHER TIGHTENING MAY BE REQUIRED SHOULD INFLATION PROVE MORE PERSISTENT THAN EXPECTEDRBA Minutes: Case to hold was stronger, recent data did not materially alter economic outlook The Minutes of the Reserve Bank of Australia’s (RBA) September monetary policy meeting, published on Tuesday, highlighted that the board agreed that the “case to hold was stronger, as recent data did not materially alter the economic outlook.” Additional takeaways: Considered raising rates by 25 bps or holding steady at September meeting. Some further tightening may be required should inflation prove more persistent than expected. Case to hold was stronger, recent data did not materially alter economic outlook. Economy still appears to be on narrow path by which inflation returns to target, employment grows. Members recognize value of allowing more time to see full effects from past tightening on economy. Policy move will be guided by incoming data and assessment of risks. Concerned about productivity growth not picking up as anticipated, services inflation remaining sticky. Fuel prices rose sharply in a