The ABS will release its September quarter inflation report later on this morning. It’s often a market mover, especially the core inflation reading.
Here’s the state of play.
- The report is based off price movements in a set basket of goods and services commonly purchased by metropolitan households.
- The basket contains 87 individual expenditure classes that form 11 broader categories. The classes are weighted based on estimated expenditure by households.
- While the headline CPI figure garners plenty of attention, for financial markets the majority of interest is in the core inflation reading given its implications for monetary policy movements from the RBA.
- Underlining this point, of the 28 rate movements made during RBA governor Glenn Stevens’ tenure, 15 have directly followed the release of the ABS inflation report.
- As a consequence of this relationship the report often creates significantly volatility across Australian interest rate markets, as well as the Australian dollar.
- During the June quarter headline inflation rose by just 0.7%, leaving the annual change at just 1.5%. Core inflation increased by 0.55% leaving the year-on-year rate at the lower end of the RBA’s 2-3% target band at 2.3%.
- Markets expect headline inflation to increase by 0.7% during the September quarter leaving the annual rate slightly firmer at 1.7%.
- Of more importance to markets, core CPI is tipped to increase by 0.5%, leaving the annual rate at 2.45%, near the centre of the RBA’s 2-3% target band.
The ABS will release its CPI report at 11.30am AEDT. Business Insider will have full coverage as soon as the data drops.