The CPI for the final quarter of 2016 released today came in slightly below market expectations at +0.5% q/q for an annual increase of +1.5% (up from +1.3% last quarter). The RBA’s preferred “core inflation” measures of Trimmed Mean and Weighted Median both rose by 0.4% q/q for year on year increases of 1.6% and 1.5% respectively. This gives an average core figure of +1.55% which is slightly above the record low +1.5% last quarter.
While the data does little to change market expectations of future RBA rate moves, it does suggest that the declines in core inflation may be coming to an end with price rises showing (small) signs of lifting from lows. Certainly this plot will do nothing to make the RBA move rates higher any time soon, but equally clear is the fact that this level of core inflation matches current RBA forecasts and is therefore equally unlikely to see them cutting rates any lower.