Author: Eamonn Sheridan

A preview of the Australian Q1 inflation data due on Wednesday 22 April 2015 at 0130GMT

Just an initial preview now, I'll try to get some more together for the Australian morning on Wednesday.

The inflation data seems to have taken on a bit more importance in the wake of today's RBA April meeting Minutes, where a point was made specifically ... 

Members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on the previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year

That specific mention of waiting for the inflation data in the Minutes had me scratching my head ... it seems to indicate to me that if the inflation data due on Wednesday shows a benign result then the RBA will cut in May. Maybe the RBA thinks there is a chance that the fall in the AUD will feed into higher than expected inflation, but if not then they'll cut in May. I reckon I'm wrong on that implication but I can't think of why it got a specific mention otherwise.

Anyway, so the inflation print on Wednesday seems to have taken on added importance.

Yesterday we got NZ inflation for Q1, it came in lower than expected.

Westpac reckon there is a decent correlation between Australian and New Zealand inflation:


Which could well mean the inflation print for Australia comes in low.

While headline inflation is overall expected to be subdued (lower petrol prices playing a large role here), the RBA pay most attention to the core rate, which in Australia is the 'trimmed mean'. This is also expected to be subdued, particularly as with unemployment above 6% and wages pressures quite restrained there is little evident pressure on core CPI. It should stay within (and to the lower end) of the RBA's 2 - 3% y/y inflation target band. (ps. While probably not an influence on tomorrows data, recent employment surveys are painting a picture of an improving labour market (albeit slowly, and maybe not enough), which may influence the RBA's view for future inflation).

I'll be back with more preview on Wednesday morning, Australian time.

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