Australia Announced Higher CPI Figures With Little Immediate Impact On The AUD

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The Australian Dollar fell when CPI came in over expectations.

After CPI came in hotter than expected, the Australian Dollar stabilised. Following the release of the shocking figures, Australian Commonwealth Government bond (ACGB) yields skyrocketed. The rise in the RBA’s preferred gauge, the so-called “trimmed mean,” is especially concerning.

Before today’s report, the RBA was expected to match its October rate hike and raise rates by merely 25 basis points at their November meeting (bps). Today’s figures will result in a re-evaluation of that scenario. In any event, a retreat from a 50-bp increase at their last meeting does not look well.

The Australian Bureau of Statistics (ABS) reported on Wednesday that the consumer price index (CPI) rose 1.8 per cent in the September quarter, exceeding market expectations of 1.6 per cent. The annual rate jumped from 6.1 per cent to 7.3 per cent, the highest since 1990 and nearly three times the rate of wage growth. The forecasted YoY trimmed mean of 5.5 per cent versus the headline CPI of 7.0 per cent.

The trimmed mean, a closely monitored gauge of core inflation, rose 1.8 per cent in the quarter, raising the annual rate to 6.1 per cent, well above estimates of 5.6 per cent. That would be bad news for the Reserve Bank of Australia (RBA), which had expected core inflation to peak at 6% in the December quarter, with CPI peaking at 7.75%.

Instead, economists predicted that core and headline inflation would rise this quarter, with the ABS’s new monthly CPI rising in September. Marcel Thieliant, a senior economist at Capital Economics, stated, “The upshot is that CPI inflation will approach 8 per cent in Q4”.

“The stronger-than-expected rise in consumer prices is consistent with our forecast that the RBA will hike rates more aggressively than most anticipate.”

Finance Minister Katy Gallagher said, “It’s very sensible to look where we can find some reprofiling, but there will also be some genuine savings.” She mentioned that delivering responsible budgeting needs more rework during uncertain times to observe budget savings.

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