Q3 CPI As Expected, Not Sure If “Job Done Yet”

RBA Governor Bullock didn’t give anything away re the likely outcome of the November 7 meeting at her Senate committee appearance. She said the bank’s forecasts will be altered in November but it’s too early to say whether there will be a “material” change in the inflation outlook and thus the return to target. With Q3 CPI in line with RBA expectations, this outlook will be key to whether it hikes next month. The RBA remains “wary” and doesn’t know if “job done yet”.

• Q3 CPI was in line with RBA expectations but was higher than the forecasts in the August Statement of Monetary Policy. The RBA will now take this information and “reflect” on it and what it means for monetary policy.
• The key remains the timing of the return of inflation to target, which has been gradually shifted out. She reiterated that the return to target within a “reasonable timeframe” is important in keeping a lid on inflation expectations. Currently Q2 2025 inflation forecast is at 3.1% and once the Board has updated forecasts it will judge how long we can stay outside the band and if monetary policy needs to “react”.
• Services inflation showed that it is “fairly persistent” and while it moderated it is still higher than the RBA is “comfortable” with. Higher input costs including wages and electricity are driving higher services prices. Bullock noted that there isn’t a price-wage spiral though but that total compensation growth is ahead of the WPI.