The ABS will release its December 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, the Australian dollar and ASX 200.
- During the September quarter, headline inflation increased by 0.5%, leaving the annual rate at 1.5%.
- Core inflation was even more benign. It increased by 0.3%, leaving the annual rate at 2.15%.
- Not only was this towards the bottom of the RBA’s 2-3% inflation target band, it marked the slowest annual increase in core inflation since Q2 2012.
- For the December quarter headline inflation is forecast to rise 0.3%, taking the annual rate to just 1.6%.
- Core inflation is tipped to increase 0.5%, leaving the annual rate at 2.10%.
The ABS will release its CPI report at 11.30am AEDT.
Business Insider will have full coverage as soon as the data drops.