AU monthly CPI indicator

Wednesday, August 30 at 11:30 am AEST

In August, the Reserve Bank of Australia (RBA) kept its cash on hold at 4.10% for a second consecutive month. This decision based on similar reasons as in July – to assess the impact of a cumulative 400bp or rate hikes and evidence that a sustainable rebalancing between supply and demand is under way.

Q2 inflation numbers released in late July were softer than expected. The annual headline inflation rate eased to 6% vs. 6.2% expected. At the same time, the annual rate of core inflation (the Trimmed Mean) eased to 5.9% vs. 6.0%.

The RBA explained its decision by noting that, while inflation remains “still too high at 6 per cent”, recent data is “consistent with inflation returning to the 2-3% target range over the forecast horizon” based on the provisor that productivity growth “picks up”.

On Wednesday the latest inflation update with the monthly CPI indicator for July will be released.

The market is looking for the Monthly CPI indicator to fall to 5.2% year-on-year from 5.4% in June. An inline or softer-than-expected number will see the RBA stay on hold in September. Currently, there are just 5bp of rate hikes priced before year-end.

ABS monthly CPI indicator chart