Australia: Inflation dead but not forgotten - TDS

Australia’s February Monthly Inflation Gauge eased by -0.1%/m (2.1%/y) and the trimmed mean measure fell by -0.2%/m (2.2%/y), notes Annette Beacher, Chief Asia-Pacific Macro Strategist at TDS.

Key Quotes

“Our tracking for the official March qtr CPI is now rather benign: while there isn’t a perfect relationship between the monthly and the comprehensive official quarterly inflation report, it appears that the climb in annual domestic inflation could pause (left chart), while tradable inflation is expected to remain negative.”

“Our tracking for the March quarter trimmed mean measure is +0.5%/qtr, the annual rate remaining at 1.8%/y for the fifth consecutive quarter. Combined with a similar increase in the weighted median measure, we expect “underlying” inflation to remain at 1.87%/y, in line with the RBA’s 1¾%/yr projection for mid-2018.”

“An ongoing benign inflation backdrop is one of many reasons why the RBA is widely expected to remain on hold for quite some time. TD still pencils in a hike in November, a view that is only 40% priced.”