Daily Commentary BY THE CURVE TEAM –

Inflation Still Undershooting

14th of January, 2020

Recent data suggests that the inflation for the fourth quarter will again fall short of the RBA’s target band.

It has been some years since inflation was in the RBA’s target band and that trend is set to continue. The monthly inflation gauge released by the Melbourne Institute yesterday suggests inflation will remain well below the target band when the official data is released later this month.

The monthly inflation gauge rose 0.3% in December despite more items in the basket of goods falling rather than rising, a pattern that has held over the past three months. According to the monthly gauge, the three month annualised pace of inflation sits at 0.4%, with the annual rate at 1.4%.

On a trimmed mean basis the story is quite similar. The annual rate sits at 1.5% after prices fell in both November and December.

The data suggests that the RBA is making little inroads into lifting inflation back towards the target band. That will keep the pressure on to do more over the coming months.

David Flanagan

Director - Interest Rate Markets