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09:27:57 28-03-2023

Australia CPI Preview: Forecasts from five major banks, inflation probably moderated

Australian Consumer Price Index (CPI) figures will be released on Wednesday, March 29 at 00:30 GMT and as we get closer to the release time, here are forecasts from economists and researchers of five major banks regarding the upcoming inflation data.

Headline is expected at 7.1% year-on-year vs. 7.4% in January. If so, it would be the second straight month of deceleration but would remain well above the 2-3% target range. 


“Our expectation for the monthly CPI of a 6.8% yearly increase would imply a monthly outcome of 0.3%, which while solidly above the pre-2022 February averages would represent a step down from the February 2022 result. A monthly CPI result weaker than our expectation would present a challenge to our view that the RBA will tighten again in April.”


“A further unwinding of the holiday-induced surge in travel and recreation prices in February, together with some lower food prices, will partly offset higher gasoline prices and some stickiness in other subcomponents to bring inflation in Australia back below 7% in February. If so, it will support the RBA’s recent hints that rates are close to a peak, with one more 25 bps hike looking like the most likely outcome now, taking the cash rate target to 3.85%.”


“We expect the Monthly CPI Indicator to fall to 7.2% from 7.4% YoY, in line with consensus, but what the services subcomponents say about inflation trends will be as important as the headline given the limitations of the monthly indicator.”


“February CPI print will grab attention after the Bank flagged it as a key data point for its April decision. Our dovish forecast (7.0% YoY) is due to the large seasonal decline from recreational services, partly offset by firm price increase rises for education and transport. We still retain a 25 bps hike for the April meeting as inflation is still far above the RBA's inflation target.”


“We expect monthly headline inflation to have fallen from 7.4% in January to 7.0% in February, which would support the argument that headline inflation peaked in December. Further evidence that inflation may have peaked could justify a pause (or termination) in the RBA tightening cycle, but solid proof can only be provided by the quarterly CPI data to be released next month.”


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