VIEW: ANZ Forecasting Above Consensus Core CPI Outcome

ANZ expects a consensus 1.1% q/q and 5.3% y/y Q3 headline inflation read when Q3 CPI prints tomorrow. But it is looking for a higher-than-expected result for the trimmed mean at 1.2% and 5.1% compared with consensus’ 1.0% and 5%.

• Given the RBA’s “low tolerance” for a delay in inflation returning to target, Q3 CPI will be monitored closely. ANZ believes “a CPI outcome in line with our expectations would make it difficult for inflation to hit the RBA’s current Q4 forecast of 4.1% y/y for headline and very difficult to hit the 3.9% y/y for trimmed mean. Indeed, an outcome in line with our 1.2% q/q forecast for the trimmed mean would be quite uncomfortable for the RBA.”
• ANZ observes “whether or not a higher Q3 CPI impacts the RBA’s longer-term forecasts is a different question. After all, despite headline inflation to the June quarter running 0.7ppts below the RBA’s forecast in the February Statement on Monetary Policy (and trimmed mean 0.3ppts lower), the respective mid-2025 inflation forecasts in the August SoMP were 0.1ppts higher(headline) or unchanged (trimmed mean) versus February’s. Put simply, there is more to a longer-term inflation forecast than a ‘historical’ surprise.”