• Westpac’s forecast for the March quarter CPI is 0.1%qtr with the annual pace easing back to 1.4%yr from 1.8%yr. • The March quarter is a seasonally soft quarter with the ABS projecting a seasonal factor of +0.2ppt. The seasonally adjusted CPI is forecast to rise 0.3%.
• Core inflation is forecast to print 0.3%qtr (0.33% at two decimal places) holding the annual pace at 1.6%yr. The trimmed mean is forecast to rise 0.34%qtr and the weighted median is forecast to rise 0.33%qtr.
• Drought conditions have a mixed impact on food prices but overall food should rise 1.1%qtr. The other main positives are alcohol & tobacco along with the annual price increases for healthcare and education which combined almost fully offset falling fuel prices, recreation and clothing & footwear.
• Traded prices are forecast to fall 0.6%qtr while non-traded prices are forecast to rise 0.6%qtr.
• Core inflation is to remain well below the bottom of the RBA target band as moderating housing costs hold back modest inflationary pressures elsewhere. Overlay a competitive deflationary pressure in consumer goods and it is hard to see core inflation breaking much higher any time soon.
Wages growth to role next.