Today’s release of CPI data for the third quarter showed inflation falling once again. The headline CPI rose by just 0.5% q/q (+0.7% Q/q previously) while the annual rate remained stable at +1.5%.
However, the measures that the RBA watch, namely Trimmed Mean and Weighted Median, were each up just 0.3% q/q for annual increases of +2.1% and +2.2% respectively. This means that the average core inflation has fallen from +2.3% in the previous quarter to just +2.15% this quarter. This places average core inflation perilously close to the bottom of the 2-3% RBA target range.
While this in itself is unlikely to force the RBA into a Melbourne Cup day rate cut, when considered in conjunction with the recent 15-20 bps hikes put through by the Big Four banks, the pressure for a move will have certainly increased. At the time of writing the futures markets are pricing a 25bps cut to a record low 1.75% next Tuesday at a little greater than 50:50.