US Fed cuts as expected; US payroll costs inflate; Canada holds its rate; China CPI stays low; IMF upgrades China growth; UST 10yr at 4.16%; gold firm, silver at another new record; oil holds; AU$1 = 66.4 USc

Here's our summary of key economic events overnight that affect Australia, with news markets have essentially been on hold overnight awaiting the US Fed's decision.

In the end, the Fed's FOMC trimmed its key rate by -25 bps to 3.75% as markets had guessed it would do. But it was not unanimous. The Trump stooge on the committee wanted a far larger cut. But the professional members fear inflation still and the small trim was the uneasy compromise. The voting was 9 members to cut by -25 bps, two to hold unchanged, and Miran wanting a big cut.

Immediately after, the UST 10yr benchmark was active with a softish tone but really little-changed. the S&P500 rose, and the USD fell slightly. More reaction will come after Chairman Powell's press conference which is about to start soon.

Earlier, the report on US mortgage applications was quite positive, up 4.8% last week from the week before which you may recall brought a small but unexpected retreat. The latest week however was all about refinance application which were up +15% on that same prior week basis.

An Q3-2025 data for US payroll compensation costs (pay plus payroll taxes plus benefits) were up +3.5% from a year ago, rising at about that rate in the latest quarter too. So American inflation isn't getting any respite from this direction.

Quite how odd the US public policy has become is revealed in a current court case. US Federal prosecutors spent over a year extraditing a Belarusian woman to the US to face charges she illegally smuggled US tech to Russia for its war on Ukraine. Then ICE stepped in accusing her of being in the country illegally, and deported her, collapsing the case. Moscow smirked in satisfaction.

In Canada, their central bank stood pat, holding their policy rate unchanged at 2.25% as widely expected. The say this is about the right level in the current uncertain environment. But they were surprised by the upside growth of GDP at +2.6% in the third quarter, found the labour market improvement better than anticipated as their unemployment rate fell. CPI inflation slowed to 2.2% in October and they see core inflation remaining in the 2.5% to 3% range.

Across the Pacific in China, there was a slight rise in CPI inflation, enhance because the previous inflation was so low. Their inflation rose 0.7% in November from a year ago, as expected and accelerating from a +0.2% increase in October. This time, food price inflation was very low. It was the second consecutive month of consumer inflation and the fastest pace since February 2024.

Meanwhile China's producer prices fell into a steeper deflation, down -2.2% in November from a year ago.

And the IMF has raised its forecast for growth of the Chinese economy for 2025 and 2026, now expecting to see an expansion of +5.0% this year.

And some influential analysts are saying the Chinese yuan is 25% undervalued and will appreciate more than forwards contracts are pricing for 2026.

And in the EU, the ECB boss Christine Lagarde says they will likely raise their forecast for EU growth as well.

Here in Australia, if you are retired and have assets, you need to pay a tax on a deemed rate of interest on your assets (irrespective of what they actually earn, if anything). That rate depends on how many assets you have. Canberra raised it in September 2025 and have now signaled they will raise it again in March.

The UST 10yr yield is now at 4.16%, dipping -1 bp from this time yesterday and holding that after the Fed decision. The key 2-10 yield curve is still at +57 bps. Their 1-5 curve is now positive by +15 bps and the 3 mth-10yr curve is still positive by +45 bps. The China 10 year bond rate is down -1 bp at 1.85%. The Japanese 10 year bond yield is holding at 1.96%. The Australian 10 year bond yield starts today at 4.78%, unchanged from yesterday. 

Wall Street has started its Wednesday with the S&P500 up just +0.1% after the Fed decision. Overnight, European markets were mixed between Paris's -0.4% drop and London's +0.1% rise. Yesterday, Tokyo ended its Wednesday trade up +0.1% again. Hong Kong was up +0.4% but Shanghai ended down -0.2%. Singapore was little-changed. The ASX200 ended its Wednesday with a -0.1% dip. 

The price of gold will start today at US$4204/oz, and down -US$17 from yesterday. And we should note again that silver has set a new record high, just under US$61/oz.

American oil prices are little-changed at just on US$58/bbl, while the international Brent price is just under US$62/bbl.

The Australian dollar is -10 bps softer from yesterday, now at just under 66.4 USc. Against the Japanese yen though we are down -30 bps at ¥103.8 AUc. Against the euro we are down -30 bps as well at 57 euro cents.

The bitcoin price starts today at US$92,274 and down -2.3% from this time yesterday. Volatility over the past 24 hours has been modest, at just over +/- 1.4%.