Australia: Core inflation to weaken in Q1 – NAB

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Analysts at National Australia Bank (NAB) offer a detailed preview of the Australian Q1 CPI data due on the cards tomorrow at 0130 GMT.

Key Quotes:

“The latest RBA Minutes outline the conditions that would see a cut to the cash rate: 

(1) inflation disappoints. 

and (2) unemployment trends up.

…  We expect core inflation to weaken in Q1, meeting part (1) of the Board’s criteria. 

According to the RBA’s latest forecast (from February), it expects trimmed mean inflation to stay at 1.8% y/y in Q2 2019 – needing a print of at least 0.5% q/q in Q1. 

As such, we expect that a 0.4% q/q (1.7% y/y) outcome would force the RBA to, once again, push out its expected return to target, by half a year, to June 2020. If achieved, that would mean 4.5 years outside the RBA’s 2-3% target.

Q1 headline CPI seen at 0.2% q/q q while trimmed mean at 0.4% q/q, 1.7% y/y.”

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