Softer Commodities To Drive Quarterly CPI Slowdown, Core Steady

CPI data for Q3 and September are released on Wednesday and they’re likely to show inflation pressures eased but remained elevated, as commodity prices and survey measures moderated. While this data are backward looking, they will be important for shaping RBA expectations.

• Economists expect headline CPI to rise 1.6%q/q and 7%y/y (Q2 1.8%q/q and 6.1%y/y), a slowdown in the quarterly pace, and the trimmed mean by 1.5%q/q and 5.5%y/y (Q2 1.5%q/q and 4.9%y/y).
• The RBA is expecting CPI inflation to end the year at 7.75% and trimmed mean at 6%. If Q3 data are in line with these forecasts then the Board is likely to hike 25bp next month but if inflation pressures have become more domestically driven, then there’s a risk the RBA’s stance could become more hawkish.
• The newly-established monthly CPI series is expected to rise 7.1%y/y in September and will give us an idea of where both headline and core inflation were going into the current quarter.
• There is a range of forecasts for Q3 CPI of between 1.1% and 2% q/q and 6.5% and 7.4% y/y (Bloomberg). It is expected to be driven by higher food, utilities, childcare and recreation prices, as well as rents. Fuel should bring overall transport prices down. (ANZ)
• Expectations for the trimmed mean vary between 1.2% and 1.8% q/q and 4.9% and 6% y/y (Bloomberg).

Source: MNI - Market News/Refinitiv