Bank projects a mixed inflation outlook, with annual CPI edging higher but core measures showing signs of easing
ANZ is predicting a modest rise in annual inflation, as markets await October’s data later this week.
According to ANZ senior economist Catherine Birch (pictured above), the annual inflation rate is expected to increase by 0.2 percentage points to 2.3%, while the “all groups excluding volatile items” measure – which strips out fuel, fruit and vegetables, and holiday travel – is forecast to ease by 0.1 percentage points to 2.6%.
Birch noted that the monthly Consumer Price Index (CPI) indicator is likely to decline by 0.2% on a month-to-month basis, reflecting expected price falls in electricity, rent, holidays, and household goods.
However, she cautioned that October’s figures, being the first month of the quarter, are limited in scope as a higher proportion of tradable goods prices are measured compared to services and non-tradable items.
The full picture for the fourth quarter is unlikely to emerge until November’s data is released on January 8, 2025, with the comprehensive Q4 CPI report scheduled for January 29. These releases will be closely scrutinised ahead of the Reserve Bank of Australia’s (RBA) policy meeting Feb. 17-18.
Minutes from the RBA’s November board meeting highlighted a cautious approach to monetary policy. While the board reiterated the need to maintain a “sufficiently restrictive” cash rate until inflation is clearly moving towards the target range, it also emphasised the importance of a “forward-looking” stance.
ANZ analysts interpret the minutes as leaving the door open for a potential easing in early 2025, contingent on further signs of inflation easing. However, the board has stressed the need to observe “more than one good quarterly inflation outcome” to confirm inflation’s downward trajectory.
“We will need to wait for the November data to get a stronger gauge of the critical Q4 CPI print, which will inform the RBA’s decision-making early next year,” Birch said.
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