{"id":146316,"date":"2019-04-23T13:27:03","date_gmt":"2019-04-23T17:27:03","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=146316"},"modified":"2019-04-23T11:27:55","modified_gmt":"2019-04-23T15:27:55","slug":"how-the-upcoming-australian-cpi-could-influence-the-rba","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/04\/how-the-upcoming-australian-cpi-could-influence-the-rba\/","title":{"rendered":"How The Upcoming Australian CPI Could Influence The RBA"},"content":{"rendered":"
April 23, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

Tonight we get a raft of quarterly CPI data from Australia. Given the data\u2019s importance for the RBA, and that we haven\u2019t had a look at inflation for a while, we could see some stronger market moves in AUD pairs following the release.<\/p>\n

It\u2019s a busy week for Aussie data but, this is likely the most important event of the week. And, depending on what we see, this could change the math on when the RBA might make its next move.<\/p>\n

The Different CPIs<\/strong><\/h2>\n

Unlike other countries, Australia publishes its consumer price index once every three months, making it a bigger event. There are three measures, and they all have their reason for being important.<\/p>\n

The first is the consumer price index as it\u2019s commonly understood. Then we have the two special CPIs: Weighted Median and Trimmed which are designed for the RBA\u2019s policymaking. It is these that are seen as the measures for achieving the bank\u2019s targets.<\/p>\n

All the data comes out at the same time at 03:30 CET (or the day before at 21:30 EST). The markets will be focusing on the quarter over quarter figures since they have more immediate relevance. However, it\u2019s the annualized numbers that guide policy.<\/p>

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The Numbers<\/strong><\/h2>\n

Q1 CPI is expected to have increased by 0.4%<\/strong>, which would be a slight slowing of the pace from 0.5% prior. On an annualized basis, that would put it at 2.0%, an uptick from the 1.8% registered prior. This would the inflation rate at the bottom of the RBA\u2019s target range of 2-3%. But, since this measure includes some more volatile components, it\u2019s not the one that is likely to determine RBA policy.<\/p>\n

Weighted median CPI is expected to also increase at 0.4%<\/strong>, remaining flat compared to the prior quarter. On an annualized basis, that implies inflation was at 1.7%, and that is below the RBA\u2019s target, although it\u2019s at the same rate as the prior quarter.<\/p>\n

The RBA Trimmed Mean CPI\u00a0<\/strong>is a little worse, though on a quarterly basis we can expect it to\u00a0also come in at 0.4%<\/strong>, maintaining stable compared to the prior quarter. On an annualized basis, however, this implies a drop to 1.7% from 1.8%. It\u2019s this move away from the bank\u2019s targets that is worrying analysts.<\/p>\n

The Reaction to the Data<\/strong><\/h2>\n

Recently, the\u00a0RBA changed its stance<\/a>\u00a0to a more dovish outlook. It replaced the expectation that the next rate hike would be to the upside with an indication that it will be able to go either way.<\/p>\n

The longer inflation remains below target, the higher the likelihood the next rate move will be to the downside. And\u00a0there is quite a lot of speculation that if this inflation data were to miss, the RBA would again change its stance.\u00a0<\/strong>It\u00a0might even hint at a rate cut in the near future!<\/p>\n

This is the position of the ANZ banking group, which, in a note to analysts, said that fuel prices are likely to have pushed inflation\u00a0down. They are expecting a core rate of just 0.3%, arguing for the scenario of a rate cut in May.<\/p>\n

A minimal increase in the inflation rate would only be marginally helpful in putting off speculation of an RBA cut\u00a0<\/strong>since the adjusted rates would have to increase at least three decimals on an annualized basis to bring the rate in line with targets.<\/p>\n

Although most of the economic indicators, like the recent PMI, show that the Aussie economy remains expansive, the trend remains less positive. And it would require more than just one positive data point to change direction.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex Tonight we get a raft of quarterly CPI data from Australia. Given the data\u2019s importance for the RBA, and that we haven\u2019t had a look at inflation for a while, we could see some stronger market moves in AUD pairs following the release. It\u2019s a busy week for Aussie data but, this is […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-146316","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146316","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=146316"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146316\/revisions"}],"predecessor-version":[{"id":146325,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146316\/revisions\/146325"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=146316"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=146316"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=146316"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}