| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - Q/Q | 1.0% | 0.8% | 1.4% |
| CPI - Y/Y | 6.2% | 6.0% | 7.0% |
| Trimmed Mean - Q/Q | 0.9% | 1.2% | |
| Trimmed Mean - Y/Y | 5.9% | 6.6% | |
| Weighted Median - Q/Q | 1.0% | 1.2% | |
| Weighted Median - Y/Y | 5.5% | 5.8% |
Highlights
Australian quarterly CPI data published today showed a fall in both headline and underlying measures of inflation in the three months to June. This is consistent with the assessment by officials at the Reserve Bank of Australia that price pressures are moderating in response to policy tightening put in place since May 2022.
The consumer price index rose 0.8 percent on the quarter in the three months to June after increasing 1.4 percent in the three months to March, with headline inflation falling from 7.0 percent to 6.0 percent, below the consensus forecast of 6.2 percent. Price pressures were mixed across major categories in the three months to June. Rents rose 2.5 percent on the quarter, the biggest increase since 1988, food prices rose 1.6 percent, and overseas travel and accommodation costs surged 6.2 percent. These increases, however, were offset by a fall of 7.2 percent in domestic travel and accommodation costs, with electricity prices dropping 1.8 percent on the quarter and fuel prices falling 0.7 percent.
Measures of core inflation, which exclude the impact of volatile price changes, also moderated in the three months to June. The trimmed mean CPI advanced 0.9 percent on the quarter after rising 1.2 percent previously, with the year-over-year increase falling from 6.6 percent to 5.9 percent. The weighted median CPI inflation measure rose 1.0 percent on the quarter after increasing 1.2 percent previously with the year-on-year increase falling from 5.8 percent to 5.5 percent.
RBA officials left policy rates on hold at their meeting earlier in the month but advised that further rate hikes remain possible. They currently forecast that inflation will not return to their target range of 2.0 percent to 3.0 percent until mid-2025, with updated forecasts due to published early next month shortly after the RBA's next policy meeting. Today's data showing a fall in inflation may reassure officials that inflation is on track to return to their target range and strengthen the case to leave rates on hold again at this meeting.
The consumer price index rose 0.8 percent on the quarter in the three months to June after increasing 1.4 percent in the three months to March, with headline inflation falling from 7.0 percent to 6.0 percent, below the consensus forecast of 6.2 percent. Price pressures were mixed across major categories in the three months to June. Rents rose 2.5 percent on the quarter, the biggest increase since 1988, food prices rose 1.6 percent, and overseas travel and accommodation costs surged 6.2 percent. These increases, however, were offset by a fall of 7.2 percent in domestic travel and accommodation costs, with electricity prices dropping 1.8 percent on the quarter and fuel prices falling 0.7 percent.
Measures of core inflation, which exclude the impact of volatile price changes, also moderated in the three months to June. The trimmed mean CPI advanced 0.9 percent on the quarter after rising 1.2 percent previously, with the year-over-year increase falling from 6.6 percent to 5.9 percent. The weighted median CPI inflation measure rose 1.0 percent on the quarter after increasing 1.2 percent previously with the year-on-year increase falling from 5.8 percent to 5.5 percent.
RBA officials left policy rates on hold at their meeting earlier in the month but advised that further rate hikes remain possible. They currently forecast that inflation will not return to their target range of 2.0 percent to 3.0 percent until mid-2025, with updated forecasts due to published early next month shortly after the RBA's next policy meeting. Today's data showing a fall in inflation may reassure officials that inflation is on track to return to their target range and strengthen the case to leave rates on hold again at this meeting.
Market Consensus Before Announcement
The quarter-to-quarter rate is seen at 1.0 percent versus 1.4 percent in the first quarter; the second-quarter year-over-year rate is seen at 6.2 percent versus the first quarter's 7.0 percent.
Definition
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services. In Australia, the CPI measures the changes in the price of a fixed basket of goods and services, acquired by household consumers who are residents in the eight State/Territory capital cities. (Darwin, Perth, Sydney, Melbourne, Hobart, Brisbane, Canberra and Adelaide).
Data are released quarterly and, since 2022, monthly. Quarterly inflation data measure the year-over-year change in the index relative to the same quarter twelve months previously. Monthly inflation data measure the year-over-year change in the index relative to the same month twelve months previously.
Data are released quarterly and, since 2022, monthly. Quarterly inflation data measure the year-over-year change in the index relative to the same quarter twelve months previously. Monthly inflation data measure the year-over-year change in the index relative to the same month twelve months previously.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as Australia, where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
For monetary policy, the Reserve Bank of Australia generally follows the annual change in the consumer price index. It has an inflation target of 2 percent to 3 percent. The RBA also has two preferred core or analytical measures - the weighted and trimmed means. The trimmed mean is a method of averaging that removes a small percentage of the largest and smallest values before calculating the mean. After removing the specified observations, the trimmed mean is found using an arithmetic averaging formula. The weighted mean excludes certain items from the CPI basket (the exclusion approach). Typically, the excluded items are those that are volatile and/or display pronounced seasonal patterns, and those that are subject to administrative price setting.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
For monetary policy, the Reserve Bank of Australia generally follows the annual change in the consumer price index. It has an inflation target of 2 percent to 3 percent. The RBA also has two preferred core or analytical measures - the weighted and trimmed means. The trimmed mean is a method of averaging that removes a small percentage of the largest and smallest values before calculating the mean. After removing the specified observations, the trimmed mean is found using an arithmetic averaging formula. The weighted mean excludes certain items from the CPI basket (the exclusion approach). Typically, the excluded items are those that are volatile and/or display pronounced seasonal patterns, and those that are subject to administrative price setting.
