AUD higher, Australian CPI beats forecasts as core inflation surprises to the upside

最近のFX関連情報Central Banks

The scale of the beat, both on headline and on the RBA’s preferred trimmed mean measure, materially changes the policy conversation heading into September. A 0.5% monthly increase in the trimmed mean, against forecasts of just 0.3%, is the kind of number that makes it very difficult for the RBA to wave through as noise, particularly once the detail shows the pressure wasn’t confined to petrol. A 1% monthly rise in market goods and services excluding volatile items, and a 1.5% jump in discretionary spending excluding tobacco, points to broad based demand side pressure rather than a narrow, temporary shock. The Australian dollar’s immediate jump reflects markets repricing the odds of another hike rather than a hold, and this is a genuine shift from the disinflation narrative that had been building around softer headline forecasts into today’s release.

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This wasn’t a petrol price blip, the breadth of the beat is what should worry the RBA.

Summary:

  • Australia’s monthly CPI rose 1.0% in July from June, above the 0.8% forecast and reversing a 0.1% decline in the prior month
  • Annual headline inflation eased to 3.5% from 3.8%, though this came in above the 3.2% to 3.3% consensus range and above median forecasts of 3.3%
  • Trimmed mean core inflation rose 0.5% month on month, well above the 0.3% forecast, keeping the annual trimmed mean rate at 3.6%, unchanged from June and above the 3.5% consensus
  • Weighted median CPI eased to 3.6% year on year from 3.7%, while rising 0.4% month on month, up from 0.3% previously
  • Detail beneath the headline shows the inflationary pulse was broad based rather than confined to fuel, with market goods and services excluding volatile items up 1% in the month and discretionary spending excluding tobacco up 1.5%
  • The breadth of the increase suggests the RBA staff’s flagged upside risk to their own inflation forecasts may be starting to materialise
  • The Australian dollar jumped on the data, with markets now treating the RBA’s September board meeting as live for a further rate hike
  • The RBA has already hiked rates three times this year in an effort to bring core inflation back within its 2% to 3% target band

Australian consumer prices rose by more than expected in July, with core inflation also surprising to the upside and reinforcing the case for a further interest rate increase from the Reserve Bank of Australia. Data from the Australian Bureau of Statistics showed the monthly Consumer Price Index rose 1.0% from June, above forecasts of a 0.8% increase, driven in part by jumps in fuel and travel costs.

The annual headline rate eased to 3.5% from June’s 3.8%, though this still came in above the 3.2% to 3.3% range flagged by the major banks ahead of the release, and above median forecasts of 3.3%. Much of the annual improvement reflected an outsized price increase from July last year dropping out of the year on year calculation, a mechanical effect flagged in previews of the data, rather than a genuine slowdown in current price momentum.

The more closely watched trimmed mean measure of core inflation told a more uncomfortable story for policymakers. The trimmed mean rose 0.5% in the month, well above the 0.3% forecast, leaving the annual trimmed mean rate at 3.6%, unchanged from June and above the 3.5% consensus among major bank economists. The weighted median measure told a more mixed story, easing to 3.6% year on year from 3.7%, but rising 0.4% month on month compared with 0.3% previously.

Detail beneath the headline numbers points to a genuinely broad based inflationary pulse rather than a narrow, temporary shock. Beyond the rise in petrol prices, goods and services excluding volatile items rose 1% in the month, while discretionary spending excluding tobacco jumped 1.5%. That breadth is likely to concern the RBA more than the fuel driven component of the increase, since it points to underlying demand pressure across a wider range of goods and services rather than a single cost driven distortion.

The scale and breadth of the beat marks a clear departure from the disinflation narrative that had been building into today’s release, when major banks had broadly expected the trimmed mean to ease modestly toward 3.5%. It also suggests the Reserve Bank’s own staff, who have previously flagged upside risk to their inflation forecasts, may see that risk beginning to materialise in the data.

The Australian dollar jumped on the release, with markets moving quickly to reprice the odds of a further rate increase at the Reserve Bank’s September board meeting, though officials are expected to weigh additional data between now and then before making a final call. The RBA has already raised its cash rate three times this year in an effort to bring core inflation back within its target band of 2% to 3%, and today’s data adds meaningful weight to the case that the tightening cycle may not yet be complete.

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Next meeting is at the end of next month:

This article was written by Eamonn Sheridan at investinglive.com.

最近のFX関連情報Central Banks

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