TD Securities/Melbourne Institute (MI) Inflation Gauge for January: +1.5% m/m
For the y/y, comes in at +1.5%
- same as the prior at 1.5% y/y
The TD trimmed mean measure is +0.3% m/m and +2.3% y/y. The RBA target band for inflation is 2 – 3%, so at 2.3% its just below the mid-point of the band. If you were to base your call on what the RBA is going to do tomorrow (to cut or not) then this 2.3% trimmed mean reading is not supportive of the call to cut. Of course, there are other factors at play and I wouldn’t say the reading prevents a cut … but it hardly screams for one.
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OK, here’s the take on the data today from Annette Beacher, Head of Asia-Pacific Research at TD Securities (h/t to Fast FT (gated) for the quick commentary):
- While early days, and masked by the fuel price slump, there could be a message in the jump in tradable audio-visual goods prices, with December discounting sharply reversed in January. Such trends bear close watching
- We expect the Board members to have a robust discussion about the impact of the lower Australian dollar and oil price slump on the outlook for domestic activity and prices, the unusual global central banks decisions in recent weeks, and the reasons behind heightened expectations for the Board to deliver a rate cut that day.
- We do not expect such a drastic shift in the RBA Board’s well-worn and transparent process, instead we favour an unchanged 2.5 per cent cash and a shift to an explicit easing bias to offer easier policy to support to demand should that prove to be necessary.
Note: Beacher is on the record as not expecting the Reserve Bank of Australia to cut rates tomorrow
