Economics Updates

Data released this morning shows the headline CPI flat for the Dec quarter for an annual rise of 3.1% (down from 3.5% in the previous quarter). The big movers in the quarter were food (-1.5%), clothing & footwear (-0.5%), health (-1.2%), communications (+1.1%), alcohol & tobacco (+0.9%) and recreation (+0.8%).
The RBA however will be far more focussed on the core inflation data (which strips out volatile movements). The Trimmed Mean measure of inflation came in at +0.6% q/q and +2.6% y/y which is broadly in line with market expectations and almost smack in the middle of the RBA's 2-3% target range. Q3 core inflation was revised up from +0.3% to +0.4%.
While this data will certainly have done nothing to persuade the RBA NOT to cut again at their next meeting in Feb, we do not believe that it makes any such cut any more likely. With inflation firmly in the centre of their target range, fears in Europe easing and monetary policy currently sitting at a neutral position (as admitted by the RBA in previous minutes) we will not be surprised if the Bank holds off from another cut this time around.