Inflation crashes below RBA forecast


Yesterday’s monthly inflation figure was a bizarre affair. The 3.4% print was materially below the 3.6% expected, but bond markets and the AUD sold off.

The RBNZ meeting was pending, but even so, this was a preposterous reaction.

The monthly fall in Aussie inflation was 0.33%, and, as well as missing expectations, it illustrated considerable slowing in Alboflation and services inflation.

Indeed, the “core inflation” print cratered below the RBA’s outlook, which should surprise nobody given its gormless forecasting record.


Monthly Q/Q core inflation annualised is now 2%, at the bottom of the RBA range! From Justin Fabo’s Antipodean Macro:

December monthly inflation was 0.7% and November 0.5%. February will have to rip higher to get anywhere near the RBA’s guesstimate of 0.8% Q/Q.


Led by a services implosion:

And energy:

Goods were higher than expected, but these should revert lower in due course:


It’s early days for Q1 inflation formation, but at this stage, the risks are tilted towards another big miss versus the RBA outlook.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.