Analysts responses to the Australian CPI data today.
(the data is here: Australia Q4 CPI: +0.2% q/q (vs. expected 0.3%))
Any bolding is mine:
CommSec chief economist Craig James:
- Inflation is holding at the low end of the Reserve Bank’s target 2-3%
- Clear that inflation is not a threat to the domestic economy
- The Reserve Bank can comfortably keep interest rates at exceptionally low levels over the medium term
- Domestic inflationary pressures remain well contained and given the slow growth in wages it is unlikely to result in a change to the domestic inflation landscape
- Despite the sharp slide in the Aussie dollar over the September and December quarters, it did not have a significant impact on lifting imported inflation – at least, not yet
- Slide in the oil price continues to offset the depreciation in the currency
- The fall in the petrol price was one of the main contributors to the subdued inflation result
- Whichever way you cut it, inflation is not a threat to the economy and the Reserve Bank will not be feeling any additional pressure to move rates in any direction any time soon
RBC economists Su-Lin Ong:
- “Core inflation was higher than expected in Q4 but downward revisions and moderate increases in demand inflation proxies confirmed a deceleration in annual price growth across a number of measures.
- There remains minimal pass-through to final prices from the weaker currency while subdued wage/unit labour costs continue to bode well for domestically generated inflation ahead.
- Today’s data are not an obstacle to further cuts.
- Coupled with heightened global central bank action and weaker commodity prices, we are adding two cuts into our RBA profile in 2015: March and May”
JP Morgan:
- Soft domestic inflation
- Core inflation still in the bottom half of the target band
- More softness to come … the peak impact of lower oil prices will impact in Q1 CPI
- Thinks the upside on the Q4 quarterly number has greater significance than the revisions, as it will linger in the annual inflation projections for longer
- “The upside today, combined with the RBA’s inclination to accentuate the positive to growth and inflation from the fall in AUD, will reduce some of the downside pressure on the inflation forecasts in February’s SoMP. As with the stable labour market data of late, the urgency for the RBA to ease policy near term has therefore been substantially reduced“
ANZ:
- Still calling for a March rate cut … “a move in March would give the RBA greater opportunity to sell any upcoming shift as an ‘insurance’ cut rather than reflecting a significant deterioration in the economic outlook”
- “While lower oil prices were always going to force a modest downward revision to the RBA’s (inflation) expectations in H1 2015, it is not clear at this stage whether the RBA’s relatively high forecasts for late 2015 and 2016 will be revised down, particularly in light of the lower AUD.”
Deutsche Bank:
- Today’s data doesn’t change their expectation that February is “probably a little too soon to see the RBA ease”
Citi:
- Underlying Q4 CPI was stronger than expected
- Surprising strength in services inflation
- Suggests robust consumer demand
- ” … will give the RBA cause for pause in assessing the need for changing from its message of predictability and stability on monetary policy”
- Overall … the net balance of rises in prices doesn’t point to any further reduction in interest rates
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AUD/USD hasn’t dropped away from its earlier highs by much, but hasn’t gone on with it yet either. The market is taking this bounce in the AUD as an opportunity to reshort, with more sell orders ahead of 0.8010 now, stops above 20. Sellers again 0.8045/50, stops above there. On the downside, some buyers 0.79050/60/70.
