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Inflation Expectations Higher, Point To Elevated Prices Ahead

AUSTRALIA DATA

The Melbourne Institute’s consumer inflation expectations for the next 12 months for November rose 0.5% m/m to 6.0% after 5.4% last month. This was the highest annual rate since July 2022 but not unexpected given the inflationary news of the past month (see Price Developments Point To Higher Inflation Expectations). Overall inflation outcomes and forecasts were higher, and this was particularly the case for energy-related items.

  • The RBA is likely to monitor this closely to see if this jump in inflation expectations is sustained, as it is concerned that inflation expectations may become deanchored or that there will be a change in price- and wage-setting psychology.
  • The Q4 average of expectations has risen to 5.7%, slightly below Q3’s 5.9%, pointing to elevated inflation again in Q4, which is when the RBA expects it to peak.
Quarterly MI inflation expectations vs CPI y/y%

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The Melbourne Institute’s consumer inflation expectations for the next 12 months for November rose 0.5% m/m to 6.0% after 5.4% last month. This was the highest annual rate since July 2022 but not unexpected given the inflationary news of the past month (see Price Developments Point To Higher Inflation Expectations). Overall inflation outcomes and forecasts were higher, and this was particularly the case for energy-related items.

  • The RBA is likely to monitor this closely to see if this jump in inflation expectations is sustained, as it is concerned that inflation expectations may become deanchored or that there will be a change in price- and wage-setting psychology.
  • The Q4 average of expectations has risen to 5.7%, slightly below Q3’s 5.9%, pointing to elevated inflation again in Q4, which is when the RBA expects it to peak.
Quarterly MI inflation expectations vs CPI y/y%

Keep reading...Show less