The Australian monthly Consumer Price Index (CPI) report is scheduled for release at 11.30am AEST, with market participants closely watching the data for indications of future monetary policy. National Australia Bank (NAB) and consensus estimates anticipate a trimmed mean CPI of 0.7 per cent quarter-over-quarter and 2.7 per cent year-over-year. This would be slightly above the Reserve Bank of Australia’s (RBA) May statement of monetary policy forecast of 0.6 and 2.6 per cent.
Scotiabank analysts suggest the report could validate market expectations of a 25 basis points rate cut at the RBA’s August 12th meeting. The RBA has previously indicated it would await further inflation data to ensure progress toward the 2.5 per cent target is sustainable. Key focus will be on the RBA’s core inflation measures – trimmed mean and weighted median – which have remained within the 2 to 3 per cent target range for the past two quarters.
NAB analysts stated that while the RBA demonstrated a more cautious approach to removing policy restrictiveness in July, the Q2 CPI data should not impede an August rate cut. They anticipate the RBA will move policy to broadly neutral settings to sustain low unemployment and support economic growth, projecting further cuts in November and February to bring the rate to 3.1 per cent. TD Securities expects headline and trimmed mean CPI to print at 2.1 per cent year-on-year and 2.6 per cent year-on-year, respectively, aligning with the RBA’s May forecasts.
eToro market analyst Josh Gilbert commented that the data will essentially determine whether a rate cut is implemented in August. eToro is a multi-asset investment platform that gives people access to trade and invest in the markets. Gilbert added that while a rate cut in August feels almost certain, the data must reinforce that inflation is under control, and that holding rates too high for too long could negatively impact the economy.
