On Wednesday we had Q3 inflation data from Australia:
After the data the Commonwealth Bank of Australia changed its forecast for Reserve Bank of Australia rate cuts. Analysts at the bank had been expecting a December rate cut, but pushed it back to a February cut. The December forecast was contingent on core inflation (as measured by the trimmed mean) dipping to 0.7% q/q, which it did not.
Summary from the note.
Underlying inflation not low enough in Q3 24 for a rate cut this year
- The headline CPI rose by 0.2%/qtr in Q3 24and the annual rate dipped to 2.8% (i.e. inside the RBA’s target band).
- The policy-relevant trimmed mean CPI increased by 0.8%/qtr and the annual rate eased to 3.5%.◼The six-month annualised rate of underlying inflation dropped to 3.3%.
- The Q3 24 trimmed mean was a touch firmer than we anticipated and as a result we no longer expect the RBA to commence normalising the cash rate in December 2024 (our call was explicitly conditional on a Q3 24 trimmed mean CPI of 0.7%/qtr or less).
- Notwithstanding, the disinflation process is intact and we pencil in February 2025 for the first 25bp rate cut. We now look for 100bp of easing over the year that would take the cash rate to 3.35% (previously we had an end 2025 cash rate of 3.10%).
The last move was a hike, just about a year ago.
