CPI data from Australia is due on Wednesday October 30.
The RBA have been missing on their inflation target for many years now. Their latest idea is to lower rates, which in turn they hope they will lower unemployment, which in turn will provide pressure to boost inflation. This is pretty standard macroeconomic monetary policy, what is surprising is it took the RBA so long to decide to do this. Anyway.
The current CPI rate is 1.6% y/y. the core rate, using the 'trimmed mean' is also 1.6% y/y.
Some quick preview thoughts:
ANZ:
- Trimmed mean inflation, the underlying measure of inflation focused on by the RBA, is expected to come in at 0.4% q/q. This would see the annual rate stay at 1.6%. We see the risks to trimmed mean inflation for the quarter as skewed to the downside slightly.
- Our forecast for trimmed mean inflation is in line with what the RBA published in its August SoMP. A number in line with this won't put any pressure on the RBA to act sooner than we currently expect.
- At this point, trimmed mean inflation would need to considerably disappoint for us to think the RBA will cut again in 2019. If the RBA eases in November, it is likely to be the result of a combination of the Fed easing in October and another weak month of retail's sales suggesting that the tax cuts are not being spent rather than soft inflation.
Westpac:
- Core inflation remains well below the bottom of the RBA target band as moderating housing costs offset modest inflationary pressure elsewhere. Competitive disinflationary pressure in consumer goods is limiting the pass through of the weaker AUD though it is having some impact. Given this we find it hard to envisage core inflation breaking higher any time soon let alone returning to the mid-point of the 2%yr to 3%yr target band.
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I'll have more to come on the CPI ahead of the data next week. But expectations will not vary too much from those quickies from ANZ and WPAC above. For the AUD its unlikely the inflation data is going to add to much support to it.
