Daily Commentary BY THE CURVE TEAM –

Inflation Data Could Shape The Monetary Policy Outlook

24th of April, 2019

As the debate over the outlook for monetary policy continues, today’s inflation data could go a long way to deciding what the RBA’s next move will be.

With the employment data remaining solid enough to keep the RBA on hold for the time being, inflation remains the only real catalyst that could trigger any action from the RBA when it meets next month.

May’s meeting is an opportune time to make a change in their message or even change policy. This is because the decision can be followed up with more detail as to why they did what they did, when they release their quarterly statement on monetary policy the Friday after the meeting.

That makes today’s inflation update very important. The market currently expects that headline inflation for the quarter will be a soft 0.2%. This would see the annual rate of inflation easy from 1.8% to 1.5%. Core inflation is expected to print at 0.4% for the quarter which would see the annual rate remain largely unchanged at 1.7%.

Should the data print in line with estimates, it wouldn’t be too much of a surprise to the RBA. The RBA’s latests forecast released in February actually point to softer inflation reads through the first half of 2019, before inflation picks up over the back half of the year. So it would take a significant downside surprise to trigger any sort of response from the RBA.

David Flanagan

Director - Interest Rate Markets