US: Growth Resilience Coexists with Inflation
The latest run of US macro data reinforces a nuanced picture: headline pressures are easing as energy prices normalise, while underlying inflation stays sticky—an unhelpful combination that keeps the Federal Reserve firmly in wait-and-see mode.
The recent decline in oil prices has unwound much of the earlier geopolitical risk premium, but it has done little to change the broader story. Core PCE—the Fed's preferred inflation gauge—rose 3.4% year-over-year, its highest reading since October 2023. Set against the resilience evident in Q2 GDP, the data points to an economy still navigating the tension between durable growth and persistent price pressures.
The June labour market offered the first clear sign of cooling. Nonfarm payrolls rose by just 57,000, well short of the 113,000 consensus and below May's revised 129,000. The unemployment rate slipped to 4.2%, but the move was driven largely by a lower participation rate rather than any genuine strengthening in labour demand. On balance, the softer employment picture supports our view that the Fed is likely to stay on hold in the near term.
One risk worth flagging: while lower oil prices have eased the immediate inflation impulse, weather could work in the other direction. Forecasters currently attach a meaningful probability to a strong El Niño developing this year, which could revive food and commodity price pressures in the second half and partially offset the disinflationary tailwind from energy. In our view, the path back to target remains uneven rather than assured.
Australia: The RBA Holds Rates Steady
The Reserve Bank of Australia left the cash rate unchanged at 4.35% in June, as widely expected. Although trimmed-mean inflation firmed to 3.6% and the labour market held up, national dwelling values declined 0.4% month-over-month against a backdrop of softening buyer demand—evidence that higher borrowing costs are steadily feeding through to the real economy. Given the well-understood lags in monetary policy, we believe the bar for further tightening has risen materially, and we expect the RBA to hold at current levels while it assesses the cumulative impact of policy delivered to date.
Against a more volatile geopolitical backdrop, Australian asset-backed securities (ABS) continue to demonstrate defensive resilience. According to the latest S&P Performance Index (SPIN), arrears on prime Australian RMBS collateral stood at 0.77% as of April 2026 (measured as loans more than 30 days past due), and have held below 1% over the trailing twelve months—a mark of solid underlying performance. Arrears on auto ABS collateral ticked up modestly to 1.39%. Overall, we would expect Australian ABS arrears to drift somewhat higher from current levels, but to remain comfortably within manageable bounds.