Australian Bond Exchange Weekly Update
1 May 2026
Market Insights
- The Australian CPI increased to 4.1% p.a. in the March quarter
- The U.S. Fed is in “wait-and-see” mode
- US company earnings remain very solid
- Global central banks are leaving cash rates unchanged
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Key Points
- Australia: The RBA increased cash rates by 0.25% to 4.10% p.a. at its March meeting. March CPI increased to 4.10% p.a., and the Trimmed Mean increased to 3.50% p.a.
- United States: The Federal Reserve left the federal funds rate unchanged at 3.50%–3.75% p.a. at its April 2026 meeting. The latest U.S. CPI inflation rate is at 3.3% p.a. as of March 2026. Core CPI was more contained at 2.6% p.a.
- United Kingdom: The Bank of England held Bank Rate steady at 3.75% p.a., and CPI for March increased to 3.3% p.a., up from 3.0% in February.
- Eurozone: The European Central Bank kept its key deposit facility rate unchanged at 2.00% p.a., and recent data show inflation in the euro area increased to 2.6% p.a. in March, up from 1.9% in February.
| Region | Policy Rate | Latest Inflation (YoY) |
|---|---|---|
| Australia | RBA Cash Rate: 4.10% p.a. | 4.1% p.a. to March 2026 |
| United States | Fed Funds: 3.50–3.75% | 3.3% (Mar 2026) |
| United Kingdom | Bank Rate: 3.75% | 3.3% (Mar 2026) |
| Eurozone | Deposit Rate: 2.00% | 2.6% (Mar 2026) |
The Australian CPI increased to 4.1% p.a. in the March quarter
The CPI gained 1.4% in the March quarter, which was slightly below market consensus. Headline inflation is clearly re-accelerating, rising to 4.1% p.a. after previously bottoming at 2.1% in mid-2025 and then climbing to 3.6% in December. The monthly trimmed mean increased 0.8% (QoQ) and 3.5% (YoY). Inflation remains broad-based with approx. 2/3 of the basket rose by more than 3% on an annualised basis. This places the spotlight firmly back onto the RBA, with most market commentators expecting another cash rate increase at its meeting next week.
Consumer Trend
The U.S. Fed is in “wait-and-see” mode
The Federal Open Market Committee (FOMC) maintained the federal funds rate at 3.50%-3.75% for a third straight meeting. However, in a notable development, there were four dissents to the Fed’s action, the highest since a central bank meeting in October 1992. Governor Stephen Miran preferred a 25 basis point cut. Meanwhile, three regional Fed bank presidents in Beth Hammack, Neel Kashkari, and Lorie Logan supported keeping rates steady, but did not support the inclusion of an easing bias in the FOMC’s statement “at this time.”
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices,” the FOMC said in a statement. Powell in his post-decision press conference, said that policymakers were in a “good place to move in either direction” towards rate cuts or rate hikes, depending on how the impact of surging oil prices due to the Iran war plays out. The Fed chair also said that the effects of the conflict on the U.S. would be substantially less than in Europe or Asia, adding that the Fed was aware American consumers were dealing with high gas prices “all over the country.”
Bond yields moved up after Jerome Powell spoke, especially short-term yields, reflecting expectations that interest rates will remain elevated for longer. As a result, traders pushed back the timing of rate cuts and reduced how many they expect this year. The US dollar also strengthened modestly on the same logic.
US company earnings remain very solid
As of late April, around 139 companies in the S&P 500 had reported first-quarter results, with roughly 81% beating earnings expectations. Analysts have revised their estimates higher and now expect aggregate S&P 500 earnings to grow about 16% year-on-year, up from roughly 14% at the start of the month. In addition, US bank lending is expanding at roughly 8% on a three-month annualised basis and around 7% year-on-year, marking a clear pickup from last year. This suggests credit conditions have eased and demand remains firm, reinforcing the view of a resilient economy, further reducing pressure on the Fed to cut rates in the near term.
Global central banks are leaving cash rates unchanged
Across the major economies, rate decisions were uneventful this week. The Federal Reserve, European Central Bank, Bank of England, Bank of Japan and Bank of Canada all opted to keep policy rates unchanged. Policymakers are no longer signalling confidence that inflation is steadily returning to target. Instead, they are grappling with a new source of uncertainty: a renewed rise in energy prices driven by geopolitical tensions in the Middle East. That dynamic is feeding directly into headline inflation and, more importantly, threatening to slow the pace of disinflation that central banks had been counting on. This has forced a subtle but important reset in communication. Rather than preparing markets for imminent easing, central banks are emphasising patience, flexibility and data dependence.
World Economic Calendar
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- Sydney Airport recorded its strongest first quarter for international travel on record, with 4.57 million international passengers in Q1 2026.
- Total passenger volumes rose 3.6% year-on-year to 10.78 million travellers through Sydney Airport in Q1 2026.
- Terminal upgrades progressed with 15 new self-service BagTag and check-in kiosks installed in T2, alongside six automatic bag drop systems now in operation.
- CEO Scott Charlton said demand remained resilient despite Middle East disruption, with airlines making mainly short-term routing adjustments and fuel conditions stable.
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Inflation-linked bonds are bonds where the value and/or interest payments increase with inflation. When inflation rises, the bond’s principal is adjusted upward, and the coupon is paid on the upward-adjusted principal. This helps protect your money’s purchasing power from rising prices.
*Data accurate as at 01.05.2026
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