| Consensus | Consensus Range | Actual | Previous | Revised | |
| CPI - Q/Q | 1.0% | 0.7% to 1.2% | 1.3% | 0.7% | |
| CPI - Y/Y | 3.0% | 2.7% to 3.0% | 3.2% | 2.1% | |
| Trimmed Mean - Q/Q | 1.0% | 0.6% | 0.7% | ||
| Trimmed Mean - Y/Y | 3.0% | 2.7% | |||
| Weighted Median - Q/Q | 1.0% | 0.6% | |||
| Weighted Median - Y/Y | 2.8% | 2.7% |
Highlights
Australian quarterly CPI data published today showed price pressures accelerated in the three months to September, with headline inflation increasing to 3.2 percent from 2.1 percent in the three months to June, above the consensus forecast of 3.0 percent. This is the highest level in six quarters and takes inflation above the Reserve Bank of Australia's target range of two percent to three percent.
The consumer price index rose 1.3 percent on the quarter in the three months to September, up sharply from an increase of 0.7 percent in the three months to June. This was above the consensus forecast of 1.0 percent. Communication and housing prices were among the categories that recorded increases stronger than the headline increase.
Measures of core inflation, which exclude the impact of volatile price changes, also picked up in the three months to September. The trimmed mean CPI advanced 1.0 percent on the quarter after rising 0.7 percent previously, with the year-over-year increase increasing from 2.7 percent to 3.0 percent. The weighted median CPI inflation measure rose 1.0 percent on the quarter after increasing 0.6 percent previously, with the year-on-year increase also picking up from 2.7 percent to 2.8 percent.
At their most recent policy meeting late September, the RBA left policy rates on hold, with officials noting"indications that inflation may be persistent in some areas". The increase in both headline and underlying measures of inflation reported today are consistent with this assessment and suggest a rate cut is unlikely at next week's RBA meeting.
Market Consensus Before Announcement
CPI expected up 1.0 percent on quarter and 3.0 percent on year in Q3 versus 0.7 percent on quarter and 2.1 percent on year 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.
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.