January CPI is about to point out electricity-driven headline energy and still-firm core inflation, protecting a Might RBA hike in play.
Abstract:
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Headline CPI seen at 0.4% m/m (seasonally adjusted) in January
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Annual inflation forecast at 3.6–3.7% y/y
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Electrical energy costs a key upside driver; gas partly offsets
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Trimmed imply seen at 0.3% m/m, annual tempo regular at 3.3%
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RBA nonetheless anticipated to hike in Might regardless of slight core moderation
Australia’s January CPI, due from the Australian Bureau of Statistics on Wednesday at 11:30am Sydney time (1930 US Jap time), is predicted to point out agency underlying inflation at the same time as seasonal elements mood headline momentum.
Each Commonwealth Financial institution of Australia and Westpac count on headline inflation to rise by 0.4% month-on-month on a seasonally adjusted foundation. On a non-seasonally adjusted measure, CBA appears for a 0.2% month-to-month acquire, whereas Westpac’s 0.1% estimate interprets to the identical 0.4% seasonally adjusted consequence.
The annual inflation charge is forecast to print between 3.6% and three.7%, easing barely from December’s tempo however remaining properly above the midpoint of the Reserve Financial institution of Australia’s 2–3% goal band.
Electrical energy costs are anticipated to be the standout contributor in January as cost-of-living rebates fade and payments revert towards underlying pricing. Meals inflation, notably contemporary fruit and greens and non-alcoholic drinks, can also be seen including upward strain. Well being prices are one other modest contributor.
These beneficial properties needs to be partly offset by declines in automotive gas, vacation journey and lodging, clothes and communications. Decrease gas costs specifically are anticipated to cushion the electricity-driven elevate in headline CPI.
The important thing focus can be underlying measures. Each banks estimate the trimmed imply rose 0.3% in January, leaving the annual tempo regular at 3.3% y/y. Westpac notes the six-month annualised charge could ease to three.4% from 3.7%, hinting at gradual moderation in momentum.
CBA’s different three-month-on-three-month trimmed imply measure is predicted to melt barely to 0.8% from 0.9%, broadly in keeping with a quarterly trimmed imply of 0.8% in Q1 2026. That might be marginally under the RBA’s central forecast of 0.9%, although nonetheless indicative of persistent underlying worth pressures.
From a coverage perspective, CBA continues to count on the Reserve Financial institution of Australia to boost the money charge in Might. Even when quarterly trimmed imply inflation undershoots the RBA’s forecast barely, the financial institution argues that may doubtless be inadequate to discourage additional tightening given the Board’s current signalling and upward revisions to the output hole and impartial charge.
With electrical energy volatility complicating the headline learn, markets are prone to focus squarely on the trimmed imply because the cleaner gauge of inflation persistence.
