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Andrew Ticehurst, Research Analyst at Nomura, notes that Australia’s headline CPI inflation rose by 0.4% q-o-q relative to consensus and Nomura forecasts of 0.5% q-o-q, while trimmed mean CPI printed at 0.5% q-o-q, in line with consensus and one-tenth below their expectation.

Key Quotes

“The data also showed modest upward revisions to Q1 CPI inflation, with the trimmed mean measure revised from 0.5% to 0.6% q-o-q, or from 0.53% to 0.56% q-o-q to two decimal places.”

“We characterise this data as broadly neutral, with headline CPI a fraction below consensus, trimmed CPI in line with consensus and modest upward revisions to Q1.”

“With trimmed mean CPI remaining at 1.9% y-o-y, the RBA can continue to characterise underlying inflation as running a fraction below the bottom of its medium term 2-3% target band. Given global risks, gently declining house prices and uncertain funding pressures, we believe it can continue to exercise patience, watching closely but doing little with its cash rate.”

“We continue to pencil in two 25bp rate hikes in 2019 but, in the same breath, note that our conviction here is quite low.”

“We continue to see fair-value for AUD at around 74 US cents, but see risk as leaning to the lower side, reflecting our cautious views on Asia and China.”