David Bassanese
2 minutes reading time
Although the monthly CPI figure should be taken with a grain of salt due to uncertain seasonal factors, the January CPI result does not bode well for those Australians hoping not to see another rate increase from the RBA.
Annual trimmed mean inflation lifted to 3.4% in January from 3.3% in December, moving further beyond the RBA’s 2–3% target band.
One caveat to today’s results is the impact of electricity subsidy roll-offs. Although the unwinding of electricity subsidies has contributed to headline inflationary pressure, it is also possibly contributing to upward pressure on measured underlying inflation by skewing the overall distribution in prices upward.
Of greater concern is the broad based nature of price increases, including across hospitality and housing, which the RBA is likely to attribute to demand factors.
Although there are two months to go before the more comprehensive March quarter CPI release, the omens do not bode well for a downside inflation surprise at this stage. As a result, assuming a quarterly inflation gain of 0.8% or more for the March quarter, it seems likely the RBA will raise rates again in the May policy meeting.