Your 10-second guide to today’s Australian inflation report

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Australia’s latest consumer price inflation (CPI) report is about to be released.

Arriving once a quarter, it is arguably the most important data release in Australia, having the power to change the narrative on the outlook for interest rates in a blink of an eye.

One only has to look at the March quarter report of 2016 for evidence.

Now, as then, most economists and traders thought that the next move in official interest rates would be higher. Then the report hit, coming in so low that it led the Reserve Bank of Australia (RBA) to cut interest rates twice over the next three months, an outcome that continues to reverberate across asset markets to this day.

It impacts everyone one way or another, and today will be no exception.

Here’s the state of play.

  • In the March quarter report, headline CPI rose by 0.5%, seeing the year-on-year rate increase to 2.1%.
  • Core inflation — of far more importance in terms of the outlook for monetary policy settings from the RBA — lifted by 0.5%, the same level reported in the final three months of 2016.
  • That took the year-on-year increase to 1.75%, up slightly on the record-low level of 1.53% reported previously.
  • Today, economists expect inflationary pressures to remain subdued.
  • Core inflation is yet again expected to increase by 0.5%, leaving the year-on-year rate unchanged at 1.75%.
  • Although such an outcome would be weak, and below the RBA’s 2-3% inflation target, 1.75% is the level the RBA forecast in its May Statement on Monetary Policy.
  • Along with recent promising signs from the labour market, a result in line or above this level would help to bolster confidence that inflationary pressures are building, and do little to hose down speculation that the RBA could lift interest rates sooner than what many currently believe.
  • Of course, if the core figure comes in below this level, it will almost certainly scupper those views in an instant.
  • Headline inflation is tipped to increase by a smaller 0.4%, although that would still see the year-on-year rate lift to 2.2%, the highest level since the September quarter of 2014.
  • While all attention in financial markets will be on the core CPI figure, the headline inflation rate is also of importance, especially with Australian wages currently growing at the slowest pace since at least the early 1990s recession.
  • This figure is influential on consumer inflation expectations, and is deemed to be an important factor for wage negotiations.
  • Adding extra spice to the CPI report, it will arrive just 95 minutes before RBA governor Philip Lowe will deliver a speech to the Anika Foundation Luncheon in Sydney.
  • The close proximity between these two market-moving events may stymie any initial market reaction to the CPI report, be it above, below or in line with expectations.

The inflation report will be released at 11.30am AEST.

Business Insider will have all of the details and implications for markets as soon as it hits the screens.