Consensus CPI Result Likely To Mean RBA February Hold

Today Q4/December CPIs print, which will be a key input into the February 6 RBA decision. Bloomberg consensus is at 0.8% q/q and 4.3% y/y for Q4 headline with trimmed mean at 0.9% and 4.3%, which are both below the RBA’s 4.5% forecast. The moderation is expected to be driven by tradeables, so domestically-driven services and non-tradeables should be monitored closely.

• Headline is forecast to be in line with Q2’s quarterly result but base effects should mean that the annual rate falls by more than 1pp. Given the data since the December meeting and overseas uncertainties, a result around the RBA’s 4.5% forecast or below is likely to mean unchanged rates in February, even if services show little progress.
• A quarterly rise around Q3’s 1.2% or higher with a sticky services quarterly rate, would be hawkish for the February RBA outcome.
• The big-4 local banks are all around consensus with ANZ and Westpac in line and NAB slightly below at 0.7% q/q/4.2% y/y and CBA 0.8%/4.2%. Estimates range from 0.7% to 1.1% q/q and 4.1%-4.6% y/y with the majority at 0.7-0.8%/4.2-4.3%.
• Most trimmed mean forecasts are around 0.8-0.9%/4.2-4.4%. The full range is between 0.8% and 1.2% q/q and 4.1-4.7% y/y. NAB expects 0.8/4.2%, CBA 0.9/4.3% and ANZ & Westpac 0.9/4.4%.
• Q4 2022 services and non-tradeables CPIs rose 2.1% q/q and core services 2.7%. Thus there will be very favourable base effects for the annual Q4 2023 rates. But if Q4 posts quarterly rates around 1.2-1.3% seen over the last two quarters, the RBA is likely to be concerned.
• December headline is forecast to moderate to 3.7% from 4.3% with forecasts between 3% and 4.4%.