A Citi analyst suggests that Australia’s latest consumer price index (CPI) figures for October may compel the Reserve Bank of Australia (RBA) to reconsider its stance on inflation. Franz Syed anticipates that the RBA may drop its characterisation of inflation as “transient” at the upcoming December board meeting. This assessment follows a report indicating that headline inflation reached 3.8 per cent last month, while the trimmed-mean inflation was 3.3 per cent, both surpassing expectations.
According to Syed, the higher-than-expected inflation figures, driven by increased prices across various goods, services, and housing costs, demonstrate persistent price pressures. “October monthly CPI confirms that there’s nothing transient about Q3 inflation,” Syed noted in a client briefing, emphasizing the significance of the monthly CPI data in providing a more current view of inflation trends compared to quarterly measures.
While Syed expects the cash rate to remain at 3.6 per cent through next year, he acknowledges that risks are “skewed” to the upside. He anticipates a potentially more hawkish tone from the RBA at the December Monetary Policy Board meeting in response to the sustained inflationary pressures.
The Reserve Bank of Australia is the country’s central bank, responsible for maintaining price stability and full employment through monetary policy. The bank’s key tool is setting the cash rate, which influences interest rates across the economy.
