| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - Y/Y | 3.4% | 3.6% | 3.5% |
Highlights
Monthly CPI data show that headline inflation in Australia rose slightly to 3.6 percent in April from 3.5 percent in March, above the consensus forecast of 3.4 percent. This is the second consecutive small increase in headline inflation and takes the level further above the Reserve Bank of Australia's target range of 2.0 percent to 3.0 percent. This monthly indicator measures the year-over-year change in the CPI index compared with the same month twelve months earlier.
Steady headline inflation in April reflects offsetting moves across major categories. Food prices rose 3.8 percent on the year in April after advancing 3.5 percent in March, with communication prices also increasing at a faster pace. Housing costs rose 4.9 percent after a previous increase of 5.2 percent, while the year-over-year increase in fuel prices slowed from 8.1 percent to 7.4 percent.
Today's data show little change in underlying price pressures in April. The measure of inflation that excludes volatile items including fuel and holiday travel was unchanged at 4.1 percent in April, while the monthly trimmed mean measure rose from 4.0 percent to 4.1 percent.
At the RBA's previous meeting, held earlier in the month, officials highlighted uncertainties impacting the inflation outlook and again reiterated that returning inflation to target remains their highest priority. This suggests that a cut in policy rates remains unlikely at upcoming meetings.
Steady headline inflation in April reflects offsetting moves across major categories. Food prices rose 3.8 percent on the year in April after advancing 3.5 percent in March, with communication prices also increasing at a faster pace. Housing costs rose 4.9 percent after a previous increase of 5.2 percent, while the year-over-year increase in fuel prices slowed from 8.1 percent to 7.4 percent.
Today's data show little change in underlying price pressures in April. The measure of inflation that excludes volatile items including fuel and holiday travel was unchanged at 4.1 percent in April, while the monthly trimmed mean measure rose from 4.0 percent to 4.1 percent.
At the RBA's previous meeting, held earlier in the month, officials highlighted uncertainties impacting the inflation outlook and again reiterated that returning inflation to target remains their highest priority. This suggests that a cut in policy rates remains unlikely at upcoming meetings.
Market Consensus Before Announcement
Consumer prices in April are expected to edge back to 3.4 percent versus 3.5 percent in March and 3.4 percent in February.
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.
