29 Jan 2015
Australia: Q4 Core CPI higher than expected but still low - NAB
FXStreet (Bali) - According to NAB Economists, the slightly higher than expected core rate in Australia for Q4 does not negate the fact that inflation is likely to remain very well-behaved over the next few quarters.
Key Quotes
"Underlying CPI rates averaged a 0.7% q/q rise and 2.2% yoy (both NAB and market at 0.5% q/q). The q/q outcome was above economists’ forecasts but the y/y rate was right in line with expectations. Market pricing expected a lower q/q outcome and “whispers” of an even lower one, and so the $A has bounced along with a sharp reduction in RBA easing expectations for February. "
"Headline CPI rose 0.2% in Q4 for 1.7% yoy (NAB -0.1%, Market +0.3%) – petrol prices fell nearly 7% in the quarter and will likely decline around 20% in Q1 driving a Q1 quarterly outcome in the order of -1% q/q."
"Surprises were broad strength in services prices and generally stronger food prices. There was limited evidence of broad-based pass through from the declining $A, but there was an influence on some items."
"Tradables inflation fell 0.6% q/q (reflecting the sharp decline in oil and moderate falls in fruit and vegetable prices), while non-tradables rose 0.6% (likely reflecting stronger services)."
"While it’s not the very low outcome the market was looking or hoping for to pressure the RBA to cut rates next week, the slightly higher than expected core rate in Q4 does not negate the fact that inflation is likely to remain very well-behaved over the next few quarters, with the core rate likely to edge to the very low end of the RBA’s band. We will wait to see whether the RBA will evolve its forward guidance language at next week’s meeting that would seem necessary for a rate cut in March."
Key Quotes
"Underlying CPI rates averaged a 0.7% q/q rise and 2.2% yoy (both NAB and market at 0.5% q/q). The q/q outcome was above economists’ forecasts but the y/y rate was right in line with expectations. Market pricing expected a lower q/q outcome and “whispers” of an even lower one, and so the $A has bounced along with a sharp reduction in RBA easing expectations for February. "
"Headline CPI rose 0.2% in Q4 for 1.7% yoy (NAB -0.1%, Market +0.3%) – petrol prices fell nearly 7% in the quarter and will likely decline around 20% in Q1 driving a Q1 quarterly outcome in the order of -1% q/q."
"Surprises were broad strength in services prices and generally stronger food prices. There was limited evidence of broad-based pass through from the declining $A, but there was an influence on some items."
"Tradables inflation fell 0.6% q/q (reflecting the sharp decline in oil and moderate falls in fruit and vegetable prices), while non-tradables rose 0.6% (likely reflecting stronger services)."
"While it’s not the very low outcome the market was looking or hoping for to pressure the RBA to cut rates next week, the slightly higher than expected core rate in Q4 does not negate the fact that inflation is likely to remain very well-behaved over the next few quarters, with the core rate likely to edge to the very low end of the RBA’s band. We will wait to see whether the RBA will evolve its forward guidance language at next week’s meeting that would seem necessary for a rate cut in March."