| Consensus | Actual | Previous | |
|---|---|---|---|
| CPI - Q/Q | 1.0% | 1.0% | 1.0% |
| CPI - Y/Y | 3.8% | 3.8% | 3.6% |
| Trimmed Mean - Q/Q | 0.8% | 1.0% | |
| Trimmed Mean - Y/Y | 3.9% | 4.0% | |
| Weighted Median - Q/Q | 0.8% | 1.1% | |
| Weighted Median - Y/Y | 4.1% | 4.4% |
Highlights
Australian quarterly CPI data published today showed an increase in headline inflation in the three months to June and a steady quarter-over-quarter increase in prices. This is the first increase in headline inflation in six quarters. Quarterly measures of underlying measures of inflation moderated in the three months to June, while monthly CPI data also released today showed a small decline in headline inflation in June after it had risen in each of the three previous months. Headline inflation has been above the Reserve Bank of Australia's target range of 2.0 percent to 3.0 percent since 2021.
The consumer price index rose 1.0 percent on the quarter in the three months to June, as it did in the three months to March, matching the consensus forecast. Headline CPI inflation rose from 3.6 percent to 3.8 percent, also matching the consensus forecast. Health, clothing and footwear, transport and housing all recorded strong quarter-over-quarter price increases in the three months to June.
Measures of core inflation, which exclude the impact of volatile price changes, moderated in the three months to June. The trimmed mean CPI advanced 0.8 percent on the quarter after rising 1.0 percent previously, with the year-over-year increase easing from 4.0 percent to 3.9 percent. The weighted median CPI inflation measure rose 0.8 percent on the quarter after increasing 1.1 percent previously, with the year-on-year increase falling from 4.4 percent to 4.1 percent.
Despite the fall in underlying inflation shown today, price pressures remain uncomfortably strong. At the RBA's most recent meeting, held mid-June, 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 in upcoming meetings and that officials will again consider a rate increase at their meeting scheduled for next week.
The consumer price index rose 1.0 percent on the quarter in the three months to June, as it did in the three months to March, matching the consensus forecast. Headline CPI inflation rose from 3.6 percent to 3.8 percent, also matching the consensus forecast. Health, clothing and footwear, transport and housing all recorded strong quarter-over-quarter price increases in the three months to June.
Measures of core inflation, which exclude the impact of volatile price changes, moderated in the three months to June. The trimmed mean CPI advanced 0.8 percent on the quarter after rising 1.0 percent previously, with the year-over-year increase easing from 4.0 percent to 3.9 percent. The weighted median CPI inflation measure rose 0.8 percent on the quarter after increasing 1.1 percent previously, with the year-on-year increase falling from 4.4 percent to 4.1 percent.
Despite the fall in underlying inflation shown today, price pressures remain uncomfortably strong. At the RBA's most recent meeting, held mid-June, 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 in upcoming meetings and that officials will again consider a rate increase at their meeting scheduled for next week.
Market Consensus Before Announcement
Second-quarter consumer prices are expected to increase 1.0 percent on the quarter and 3.8 percent on the year. These would compare with first-quarter rates of 1.0 and 3.6 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.
