Tuesday, August 11

The Reserve Bank of Australia held its cash rate at 4.35% unanimously but did not deliver the dovish signal markets might have wanted. The bank said policy remains slightly restrictive and kept open the possibility of another increase if inflation fails to moderate, despite slowing growth.

Its projection that inflation will not return to the midpoint of the target band until late 2027 is the more consequential detail. That unusually extended horizon reinforces the RBA’s reluctance to declare victory and keeps Australian front-end rates exposed to upside surprises. The decision arrived as global markets awaited U.S. July CPI, scheduled for August 12, making the Australian stance an early reminder that central banks remain constrained by persistent price pressures rather than weak activity alone.

The RBI left its repo rate unchanged at 5.25% in a unanimous decision, joining the RBA in waiting for clearer evidence on the inflation and growth outlook. The contrast came from Brazil, where July IPCA rose only 0.03% month over month and the annual rate eased to 4.4%, reinforcing expectations that the Selic can remain at 14.00% rather than move higher.

The immediate global test remained U.S. CPI, with rates markets particularly sensitive to whether energy prices revive inflation expectations. A recent oil rally had already pushed back some pricing for a September Federal Reserve rate rise after weak U.S. jobs data briefly reduced those odds. The result is a market increasingly driven by incoming inflation details, with little room for central banks to pre-commit while commodity prices remain volatile.

LME aluminum climbed to a seven-week high on concerns over Gulf supply, with reduced natural-gas availability reportedly cutting alumina production to about 50% of capacity. Norsk Hydro also trimmed output at its Brazil plant, adding a separate disruption to an already constrained supply picture.

The move matters beyond metals because it connects geopolitical stress and energy availability directly to manufacturing costs. Higher aluminum prices add another route for commodity inflation to feed into producer prices just as central banks are emphasizing persistence. The story also fits the broader supply-chain pressure visible in industrial companies, though the available reporting does not establish the eventual scale or duration of the production losses.

General Motors is setting up a $4.5 billion safety net to avoid parts shortages, a significant commitment that puts supply-chain resilience back at the center of the auto outlook. The decision implies that the company sees disruption risk as material enough to justify substantial financial protection rather than relying solely on just-in-time sourcing.

The issue is not isolated to GM: GE Aerospace was also cited as facing supply-chain problems that are slowing production. Together, the reports point to a continuing constraint on industrial output even as the macro debate focuses on rates and inflation. For manufacturers, the implication is a trade-off between carrying more inventory or accepting delayed production, with either outcome capable of pressuring margins and keeping goods-side price risks elevated.