Australia CPI Preview: Underlying inflation likely to remain weak - ANZ

Research Team at ANZ, suggests that the Australian Q3 CPI data (on 26 October) will be key for the RBA outlook and expect the data to show that underlying inflation has remained weak.

Key Quotes

“On our forecasts, the data are unlikely to be enough to provide confirmation that disinflationary forces are fading. This would complicate the monetary policy outlook, although we don’t expect the RBA to mechanically respond to a low result.

We expect the trimmed mean to have risen by 0.3% q/q and the weighted median by 0.4% q/q. This would see the average of the two underlying measures rise by 0.4% q/q and be steady at 1.5% y/y.

Importantly, the risks around this forecast seem tilted to the downside given still weak wage growth, low rental inflation, and ongoing pressure on a broad range of retail prices.

In our view, an outcome for the average of the two underlying measures of 0.3% q/q or less would concern the RBA given it would be below the implied RBA forecast and likely trigger a downgrade to the RBA’s inflation profile.”