About Turn On Firmer Than Expected Domestic Inflation Data

Back the other way for Aussie bonds, as firmer than expected Australian CPI data weighs, at odds with what saw across the Tasman earlier (at least relative to RBNZ expectations). That leaves YM at unchanged levels and XM +3.0, a touch off their post-data bases, while cash ACGBs are flat to 4bp richer, with a flattening bias now observed. Bills run 2-6bp lower on the day, bear flattening after the early bull flattening, while RBA dated OIS push out, now showing 20-21bp of tightening for next month’s gathering, while terminal cash rate pricing prints back above 3.60% after showing below 3.50% pre-data.

• The Q4 headline (+1.9% Q/Q & +7.8% Y/Y), trimmed mean (+1.7% Q/Q & +6.9% Y/Y), weighted median (+1.6% Q/Q & +5.8 Y/Y) and Dec CPI (+8.4% Y/Y) releases comfortably topped the BBG survey medians, with only the trimmed mean Q/Q metric seeing a step down in the sequential pace of inflation.
• The headline CPI metric was a touch below the RBA’s forecast +8% Y/Y, although the trimmed mean metric topped the Bank’s +6.5% Y/Y forecast.
• The ABS noted that the major contributors to inflation in Q4 were “domestic holiday travel and accommodation, electricity, and international holiday travel and accommodation.” The electricity price component was particularly noisy, given the mixed impact of the various fiscal programmes observed across the states.