AUD: CPI eases as overall inflation falls short of expectations – UOB Group

Headline Inflation Remains Steady, Eases Below Forecasts

Australia's headline Consumer Price Index (CPI) showed no change for the month and decelerated to an annual rate of 3.4%, coming in lower than anticipated as core inflation moderated slightly. According to UOB Group economist Lee Sue Ann, this milder inflation reading is not expected to impact the Reserve Bank of Australia's (RBA) policy decision in February, with market focus shifting to the more comprehensive quarterly inflation figures due later this month.

Limited Impact on RBA Policy Outlook

The latest data revealed that headline CPI was unchanged month-over-month and slowed to 3.4% year-over-year, missing market expectations. The trimmed mean, which excludes volatile items, also showed a slight decrease, while seasonally adjusted CPI edged up by 0.2% over the month.

• Housing costs increased by 5.2% year-over-year, largely driven by a 19.7% jump in electricity prices following the expiration of rebates. Without accounting for rebates, electricity rates rose by a more moderate 4.6%.
• Inflation for food and transportation remained steady, with annual increases of approximately 3.3% and 2.7%, respectively.

As the monthly CPI measure is still relatively new, the softer November result is unlikely to alter the RBA’s stance at its upcoming meeting on February 3. Instead, greater significance is placed on the quarterly inflation report scheduled for release on January 28.