Q2 Inflation Forecast To Moderate To Around RBA Forecast

Q2 and June CPI data are released on Wednesday and will be an important input into the RBA’s August 1 decision on rates. Both headline and the trimmed mean are expected to moderate further posting the lowest quarterly increases since H2 2021. Expectations are close to the RBA’s May June-23 forecasts of 6.3% and 6.0% respectively, which may be enough for another pause dependent on services inflation.

• NZ’s Q2 outcome suggests that Australia’s headline inflation should moderate towards the RBA’s Q2 forecast (see MNI NZ Q2 CPI Pointing To Sticky Australian Services Inflation) but economists expect it to go lower. Bloomberg consensus has the CPI rising 1% q/q to be 6.2% y/y, down from 7% in Q1. Expectations are between 0.6% and 1.4% q/q and 5.8% and 6.7% y/y with most around 0.9%-1.2% and 6.1%-6.4%. Both NAB & CBA expect 0.9% q/q and 6.1% y/y, ANZ 1.0%/6.2% and Westpac 1.1%/6.3%.
• NZ’s underlying inflation was steady at its peak of 5.8% in Q2 and given the high correlation suggests a risk that Australia’s trimmed mean proves sticky (see MNI Underlying Inflation Fails To Ease In Q2, Watch & Wait). Analysts forecast it to rise 1.1% q/q to be 6% y/y down from 6.6% in Q1. Estimates range from 0.8% to 1.3% q/q and 5.8% to 6.3% y/y. NAB and Westpac are in line with consensus but ANZ and CBA are slightly lower at 1.0% q/q and 5.9% y/y.
• June CPI inflation is expected to moderate further to 5.4% y/y from 5.6% with estimates between 5.2% and 6%. ANZ is at consensus whereas Westpac is looking for an increase to 5.8%.