| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| CPI - Q/Q | 0.4% | 0.1% to 0.5% | 0.2% | 1.0% | |
| CPI - Y/Y | 3.0% | 2.8% to 3.0% | 2.8% | 3.8% | |
| Trimmed Mean - Q/Q | 0.8% | 0.8% | 0.9% | ||
| Trimmed Mean - Y/Y | 3.5% | 3.9% | 4.0% | ||
| Weighted Median - Q/Q | 0.9% | 0.8% | |||
| Weighted Median - Y/Y | 3.8% | 4.1% | 4.2% |
Highlights
Australian quarterly CPI data published today showed weaker price pressures in the three months to September, with headline inflation falling back to within the Reserve Bank of Australia' target range of two percent to three percent for the first time since 2021. Underlying measures of inflation also moderated, while monthly CPI data also released today also showed a decline in headline inflation in September.
The consumer price index rose 0.2 percent on the quarter in the three months to September, moderating from an increase of 1.0 percent the three months to June and weaker than the consensus forecast of 0.4 percent. Health, clothing and footwear, transport and housing all recorded quarter-over-quarter price declines in the three months to September, partly offset by increases in food and education prices. Headline CPI inflation fell from 3.8 percent to 2.8 percent, below the consensus forecast of 3.0 percent.
Measures of core inflation, which exclude the impact of volatile price changes, also moderated in the three months to September. The trimmed mean CPI advanced 0.8 percent on the quarter after rising 0.9 percent previously, with the year-over-year increase falling from 4.0 percent to 3.5 percent. The weighted median CPI inflation measure rose 0.9 percent on the quarter after increasing 0.8 percent previously, with the year-on-year increase falling from 4.2 percent to 3.8 percent.
Despite the fall in underlying inflation shown today, price pressures remain uncomfortably strong, with the fall in headline inflation largely reflecting the impact of government electricity rebates. At the RBA's most recent meeting, held late September, officials highlighted uncertainties impacting the inflation outlook and again reiterated that returning inflation to target on a sustainable basis remains their highest priority. This suggests that a cut in policy rates remains unlikely at their next meeting scheduled for next week.
The consumer price index rose 0.2 percent on the quarter in the three months to September, moderating from an increase of 1.0 percent the three months to June and weaker than the consensus forecast of 0.4 percent. Health, clothing and footwear, transport and housing all recorded quarter-over-quarter price declines in the three months to September, partly offset by increases in food and education prices. Headline CPI inflation fell from 3.8 percent to 2.8 percent, below the consensus forecast of 3.0 percent.
Measures of core inflation, which exclude the impact of volatile price changes, also moderated in the three months to September. The trimmed mean CPI advanced 0.8 percent on the quarter after rising 0.9 percent previously, with the year-over-year increase falling from 4.0 percent to 3.5 percent. The weighted median CPI inflation measure rose 0.9 percent on the quarter after increasing 0.8 percent previously, with the year-on-year increase falling from 4.2 percent to 3.8 percent.
Despite the fall in underlying inflation shown today, price pressures remain uncomfortably strong, with the fall in headline inflation largely reflecting the impact of government electricity rebates. At the RBA's most recent meeting, held late September, officials highlighted uncertainties impacting the inflation outlook and again reiterated that returning inflation to target on a sustainable basis remains their highest priority. This suggests that a cut in policy rates remains unlikely at their next meeting scheduled for next week.
Market Consensus Before Announcement
The consensus looks for a very moderate 0.4 percent rise in the third quarter after a 1.0 percent figure in Q2. The year-on-year increase is seen at 3.0 percent versus 3.8 percent in Q2.
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.
