Oil Surge Squeezes Households as Rate Setters Decide

Brent crude rose 3.1% to $US116.72 a barrel as higher oil prices fed inflation concerns and pushed investors to watch central banks’ next moves. The cost of that market turbulence reaches beyond trading floors: the SMH reported that the U.S. war with Iran had severely cut global oil supply, raising the cost of goods including gasoline, food and clothing.

Australian shares were set for a fall. Futures pointed to a 0.5% decline at Monday’s open, with ASX 200 futures at 8,774 points after the index closed Friday at 8,795. The AFR also reported a 43-point fall was indicated. The market’s numbers move quickly; households facing higher prices have less room to maneuver.

Who sets the terms

Investors enter a busy week of economic releases, company earnings and central-bank decisions, with officials’ rate choices shaping the cost of borrowing across the economy. Markets expected the U.S. Federal Reserve to hold rates at its meeting the following week, while leaning toward another increase in December. The U.S. 10-year Treasury yield was reported at 4.99% by the SMH, up from 4.96% late Thursday; ABC’s snapshot put it at 5.00% and Australia’s at 5.17%.

Inflation in the United States remained well above 3%, and September personal consumption expenditures inflation was expected to register 3.7%, above the Fed’s 2% target. That leaves workers and households exposed to the consequences of both rising prices and decisions made in central-bank rooms they don’t control.

Australian third-quarter CPI and an RBA Senate committee hearing were due Wednesday. The market consensus for quarterly headline inflation was 1.3%, up from 0.6%, with the annual rate expected to remain at 3.9%. The RBA’s preferred trimmed-mean measure was forecast at 0.6% for the quarter, while another part of ABC’s report put it around 1.0%; the annual rate was expected to hold at 3.6%.

Commonwealth Bank’s economics team wrote: “If realised, this would mark the fifth consecutive quarter in which trimmed mean inflation has increased by between 0.8% and 1.0%, highlighting the persistence of underlying inflation pressures.” The team said the outcome would also be above the RBA’s August forecast of around 0.8% per quarter, though it added that the strength of the July and August monthly CPI prints meant “some deterioration in the inflation outlook is already well understood by the Board.”

The bill travels downward

Energy shares gained as broad markets fell. Chevron rose 2.9% and ConocoPhillips 3.6%; nearly three out of every four S&P 500 stocks declined. The S&P 500 fell 0.5%, the Dow Jones Industrial Average lost 1.2% and the Nasdaq composite slipped 0.2%. Oil’s climb also reinforced inflation concerns and expectations of U.S. rate increases, while gold fell below $US4,000 an ounce for the first time since July, according to ABC.

The third-quarter Producer Price Index was due Friday. CBA said final demand prices rose 1.3% in the second quarter and 3.6% over the year, the strongest quarterly increase since September 2023, with higher energy, freight and construction costs prominent. “The Q3 release will therefore be useful for assessing whether recent energy and supply chain pressures are continuing to lift upstream inflation,” the bank said.

No market voice from below

RBA Governor Michelle Bullock and her key lieutenants were scheduled to appear before the Senate Estimates Committee in Canberra around the CPI release. The report describes no grassroots response or mutual-aid effort; its cast is investors, companies and officials measuring prices and deciding rates.

The week’s other decisions include rate announcements from the Federal Reserve and Bank of Canada on Thursday, followed by the European Central Bank and Bank of Japan on Friday. Those banks were expected to hold rates, while New Zealand’s central bank was expected to lift its cash rate by 25 basis points to 3.0% on Wednesday. In Britain, Chancellor John Healy said he would stick to the current fiscal rules and aimed to deliver “a buffer also for uncertainty.” For people living with the prices and borrowing costs produced by these decisions, the buffer is still a promise made from above.