VIEW: CBA: Transitory The Key Word For The RBA

CBA note that "the RBA has forecast trimmed mean CPI to be 1.75% at Q421, which implied quarterly growth rates of 0.4‑0.5% over the September and December quarters. As such, today's outcome is a significant miss on their forecasts and they will need to make upward revisions to their forecast profile for underlying inflation in the November Statement on Monetary Policy."

• "However, the RBA are likely to view the increase in home building costs as transitory, which means they may not make much of a change to their medium-term inflation forecast (the current forecast is 2.25% Y/Y at end‑2023; the RBA are unlikely to lift that number by more than 0.25% if at all)."
• "From this point, just like a number of other major central banks, we are likely to hear the RBA start to use the word 'transitory' to describe some of the current inflationary pressures. The RBA will need to see evidence of a lift in wages growth before they make any major surgery to their profile for underlying inflation."