Free Trial

Bund call seller


Will Consensus Underestimate Core CPI Again?

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

Next Wednesday's Q2 CPI data will be the key focus point next week. To recap, the market consensus is for a further decent step up - headline to 6.2% from 5.1% in Q1, 4.7% for the trimmed mean (the RBA’s preferred core measure) versus 3.7% last quarter. The quarterly pace is expected to be more benign, at least relative to recent history. For headline the forecast is 1.9% versus 2.1% previously, while core 1.5% from 1.4% in Q1.

  • The general bias towards upside inflation surprises in major economies suggests risks for the AU print rest to the upside. The Citi inflation surprise index is off its record highs but remains very elevated by historical standards.
  • The recent NZ Q2 CPI print also points to upside risks. This data surprised on the upside earlier in July. The chart below plots the YoY CPI trends for both economies.
  • The long run correlation (past 2 decades) for quarterly changes in headline CPI for the two economies is +56%. For the past 3 years this is +71%. Not surprisingly, these correlations are higher in YoY terms.
  • For core inflation, the long run correlation (for YoY data) is 57%, but higher in recent years.
  • As we noted yesterday, short term correlations for the AUD and yield spreads have picked up in recent weeks. Next week's data could certainly influence market thinking around the pace of rate hikes of the next 6 months.

Fig 1: AU & NZ CPI YOY

Source: MNI - Market News/Bloomberg

To read the full story

Why Subscribe to

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.