Market Summary - October 28, 2026

Economic Overview

Australia's trimmed mean inflation has risen to 3.7% year-over-year in the third quarter, surpassing expectations of 3.6%. RBA Governor Michele Bullock emphasized that inflation remains "far too high" and that domestic demand is exceeding the economy's supply capacity. As a result, the market has increased the likelihood of a 25 basis point rate hike at the upcoming meeting on November 3 to approximately 75%.

Governor Bullock also noted that the RBA cannot ignore inflation driven by supply shocks, particularly as higher energy costs may influence broader price categories and inflation expectations.

New Zealand Monetary Policy

The Reserve Bank of New Zealand (RBNZ) made an unexpected decision to maintain the Official Cash Rate (OCR) at 2.75% in a closely contested 4–3 vote, despite market expectations of a rate hike with a probability of around 90%. The majority of policymakers cited lower-than-expected inflation, weak wage growth, and fragile domestic demand as reasons for the pause. This decision led to a sharp depreciation of the New Zealand dollar.

Governor Breman cautioned against interpreting this decision as overly dovish, indicating that further rate hikes are likely and that monetary policy may need to become clearly restrictive. The central bank is also wary of the persistent weakness of the NZD, which could exacerbate imported inflation, making the upcoming December meeting crucial.

Oil Market Update

Brent crude oil prices have increased by 1.36%, reaching $111.20 per barrel, following reports of a missile attack on Saudi Arabia's largest refinery by the Houthis. Saudi authorities have yet to confirm any damage, but a shutdown of the refinery would significantly impact the already tight market for refined petroleum products.

Additionally, UBS has projected that Brent crude will trade near $110 per barrel by year-end and has raised its forecasts for 2027. The bank suggests that pressures in the oil market are shifting from production shortages to logistical constraints, attacks on shipping, and elevated freight costs.

U.S. Economic Outlook

Markets are anticipating that the Federal Reserve will keep interest rates unchanged in their upcoming meeting, with attention shifting to Chair Warsh's guidance regarding December. U.S. Treasury yields remain close to 5%, indicating that even a moderately hawkish message could exert pressure on equities and bolster the U.S. dollar.