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Inflation data from Australia for the January to March quarter of 2018
Headline CPI
0.4% q/q - lower than estimate
- expected +0.5% q/q, prior was +0.6%
1.9% y/y - lower than estimate
- expected 2.0%, prior 1.9%
Measure of core inflation (RBA target band is 2 to 3%)
Trimmed mean
0.5% q/q ... in line
- expected 0.5%, prior 0.4% q/q
1.9% y/y - higher than estimate for the y/y
- expected 1.8%, prior 1.8%
Weighted median
0.5% q/q ... in line
- expected 0.5%, prior was 0.4%
2.0% y/y - higher than estimate for the y/y
- expected 1.9%, prior was 2.0%
Headline a touch lower than the median consensus expected, but for the core measures they are ever so slightly higher (y/y) and its the core measures that the RBA focus on.
The Australian dollar is little changed from immediately prior to the result publishing. AUD had dropped a little further in the lead up to the release, after it fell overnight. AUD/USD edging just a few pips up as I post. Shorts will be taking the opportunity to do a bit of covering after the drop.
For the RBA .... core measures are running at (weighed median) or just under (trimmed mean) the bottom end of the target band. It will not shift RBA policy in the coming months. The next major data point will be the next 3 employment reports and then the Q2 CPI in 3 months time (on the 25th of July).
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For background on this:
- Morgan Stanley on the AUD ahead of CPI data - reiterate their bearish view
- Australian Q1 2018 inflation data due today - another preview
- Australian inflation data due today - preview
- Heads up for AUD traders - Australian CPI data for Q1 - preview
- What will guide AUD/USD this week (event risk for the Australian dollar)
- Australian Q1 inflation data due this week - preview
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More explanation on underlying inflation and headline
"headline inflation" is the All Groups CPI
- weighted average of eight capital cities as well as a range of sub components and analytical measures.
- The All Groups CPI measures the change in price of the entire CPI basket including any price shocks up or down (e.g. price spikes caused by supply constraints or a change in government subsidies or taxes).
he Trimmed mean and Weighted median, are commonly termed "underlying inflation"
- The Trimmed mean and Weighted median series are part of the suite of analytical measures of the CPI.
- They aim to remove volatility observed in the quarterly price change of the original CPI caused by seasonal and irregular price movements to estimate the underlying inflation trend.