Elliot Clarke, Research Analyst at Westpac, suggests that in Australia inflation was a key focus this week and the June quarter CPI kept to a familiar theme as the headline series disappointed the market’s expectation for a seventh consecutive quarter.
Key Quotes
“Headline and core inflation were both benign in the quarter at 0.4% and 0.5% respectively, with the weaker result for headline inflation coming as a result of June being a seasonally weak quarter (the core measures are seasonally adjusted and so abstract from this volatility).”
“The annual rates also remain wedded to the bottom of the target band, at 2.1%yr and 1.9%yr respectively for headline and core inflation. As it stands, the balance of risks imply that inflation is likely to hold around this pace through the remainder of 2018 and 2019.”
“Key non-tradeable prices, particularly for housing, health and education, are restraining inflation, while energy prices have become an outright deflationary force.”
“Outside of these factors however, there is no real evidence of a broadening in price disinflation/ deflation. As a result, inflation will not act as a catalyst to change the stance of policy.”
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