David Bassanese
2 minutes reading time
While today’s slightly softer-than-expected consumer price index (CPI) report for February is encouraging news, it does not definitively rule out a further RBA rate hike in May.
Annual trimmed mean inflation was 3.3% in February, just below the market expectation of 3.4%. What’s more, annual trimmed mean inflation in January was revised down from 3.4% to 3.3%. Annual trimmed mean inflation has now held at 3.3% for the past three months.
That said, as the RBA has long argued, the monthly CPI reports can be volatile, with still not well-known seasonal variability. Today’s ‘soft’ February report follows on from a seemingly ‘hot’ January report. Today’s report also pre-dates the recent surge in petrol prices owing to the war in Iran.
All up, we’ll get a better picture of recent inflation trends when the all-important March quarter CPI report is released in late April. That report will also include the recent surge in petrol prices. Of course, depending on how US-Iran peace talks progress in the coming days, petrol prices could soon ease once again – although this won’t be early enough to be reflected in the March quarter inflation results.
As it stands, it’s still likely that the March quarter inflation report will be uncomfortably high, leaving the Reserve Bank under pressure to raise rates again in May. News of a possible peace deal in Iran can’t come quickly enough.