Australia CPI: Underlying inflation to lift to 1.9%/yr - TDS

Analysts at TDS are on the hawkish side of tomorrow’s Q1 CPI report for Australia and are looking for underlying inflation to lift to 1.9%/yr, a pip higher than consensus’ 1.8%/yr.

Key Quotes

“We doubt that such a marginal upside surprise will have lasting impact on the markets as that outcome remains consistent with the RBA’s 2% projection by mid-year.”

“OIS late yesterday (markets closed today) was pricing a 15% chance of a cut by August, before grinding higher to 50/50 for +25bp by Q3 2018. Consensus expects the RBA to hold at 1.5% through to 2018.”

“AUD at $US0.756 is marking time through the holiday today and awaiting tomorrow’s report for direction. Next week brings the RBA duo of the Board meeting and the quarterly Statement on Monetary Policy.”