The February RBA meeting is a closer call than markets are pricing it for, according to Deutsche Bank.
The bank notes that headline CPI increased 1.0% monthly/3.8% year over year in December, about 0.2 points higher than expected.
Although year-ended slightly above consensus at 3.4% (3.35% yoy to two decimal places), key core metrics were in line or softer: quarterly trimmed mean at 0.9% qoq.
Significantly, December’s monthly print was 0.23% mom, which was lower than November’s 0.258% mom and December’s 0.33% mom.
Focusing on the legacy quarterly trimmed mean print, which at 0.9% qoq was stronger than the RBA’s forecast at 0.8% qoq, ignores two important aspects of the official monthly data:
(1) it was an accurate guide to the legacy quarterly measure this quarter, and as such,
(2) the direction of travel revealed by that monthly data should help the RBA’s prior assessment that the inflation spike around Q3-25 was temporary.
Deutsche emphasises that the December monthly trimmed mean print annualised at 2.8%, falling within the 2-3% target area of the RBA.
Thus, it sees no hike in February, according to Deutsche.
I would like to agree, but with another giant leap in energy bills looming, I think the bank will blunder into a hike.
