Data Snapshot: CPI - Inflation Remains Subdued

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• Headline CPI rose 0.4% in the June quarter, which was a touch above our forecast, but continues to indicate that inflation remains subdued. This resulted in the annual rate lifting to 2.1% in the June quarter, from 1.9% in the March quarter. 

 

• More relevant for the Reserve Bank of Australia (RBA) are the underlying rates of inflation, the trimmed mean and the weighted median. The average of these two underlying measures rose 0.5% in the June quarter, in line with our forecast.

 

• The annual rate of underlying inflation fell to 1.9% in the June quarter, from 2.0% in the March quarter. It has returned to below the RBA’s 2-3% per annum target inflation band. 

 

• In the June quarter, price increases were driven by automotive fuel, reflecting higher oil prices, and a rise in medical & hospital services and tobacco prices. These price rises were offset by declining prices for domestic holiday travel & accommodation, motor vehicles and vegetables.

 

• Underlying inflation is under the RBA’s 2 to 3 % per annum target band, indicating inflation remains low. We do not expect inflation will hit the middle of the RBA’s target band over the medium term. With limited price pressures we expect the RBA to remain on hold for some time.

 

Please see the attached report for more information.

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