VIEW: Caution Around Oct CPI, Not Enough For RBA Pause In December

Here are some views post today’s CPI data.

• Citi has cut its Australian 2023 GDP forecast to 1.4% from 2.3%, weakest since 1991, with the unemployment rate rising to 4.4%. Its terminal rate forecast is 3.35% with risks skewed to the upside, on the back of wages and persistent inflation. The first cut is forecast for Q2 2024.
• ANZ doesn’t think that the October CPI will be enough for the RBA to pause in December quoting Deputy Governor Bullock that it will take time to “figure out what is the noise”. ANZ continues to expect Q4 CPI to accelerate but will be watching for signs of easing global supply issues and cost pass-through.
• Goldman Sachs warns that 38% of the basket was assumed flat in the October CPI reading and so inflation is likely to accelerate next month.
• Betashares chief economist Bassanesse believes that today’s inflation data could be enough for the RBA to pause in February given how much tightening will have occurred in one year, extremely low housing affordability and global growth risks.
• AMP Capital senior economist Mousina cautioned that it was too soon to call a peak in inflation given that the data is not as broad as the quarterly series and that the October reading excluded restaurants, new apartment purchase costs and electricity & gas prices. The RBA is also unlikely to pause in December as inflation is well above target, Q3 wages growth surprised to the upside and the labour market remains “ultra tight”.
  - The Australian