Today’s CPI inflation release for May from the Australian Bureau of Statistics (ABS) delivered a material downside surprise to headline inflation, largely due to lower fuel costs. However, there was an upside surprise in trimmed-mean inflation, which accelerated to 3.6% year-on-year, up from 3.4% in April.
Table by Alex Joiner at IFM Investors
The following chart from Alex Joiner, chief economist at IFM Investors, shows that trimmed mean inflation in May was tracking ahead of the RBA’s latest forecast:
This month’s monetary policy decision from the RBA delivered a hawkish hold, with the board concerned about inflation becoming embedded.
Accordingly, the RBA explicitly flagged “increasing the cash rate target further if required” should inflation worsen.
Today’s inflation print suggests that further monetary tightening will remain firmly on the RBA’s agenda.
