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Despite the headline (seasonally adjusted) CPI data coming in a good deal lower than expected, the more significant (so far as potential RBA rate decisions is concerned) core inflation measures nudged very slightly higher in the June quarter.
The headline CPI came in as +0.2% q/q for a +1.9% y/y rate. Expectations had been for +0.4% q/q to leave the annual rate about unchanged at +2.1%. However, the more closely-watch core measures (Trimmed Mean and Weighted Median) both came in at +0.5% q/q for an annual increase of 1.8%; a slight increase from the +1.75% rate of the previous quarter and broadly in line with expectations.
Given that the A$ on a trade weighted basis has risen by 4.8% over the past year, it is little surprise that Tradables inflation is a major reason for low price increases. Over the year we see Tradables inflation running at just +0.4% y/y (down from +1.3% y/y last quarter) while Non-tradables hit a new 3 year high of +2.7% in June. If the RBA can actually get their way and drive the A$ lower then we should see the Tradables inflation numbers start to edge higher, and that in turn will no doubt push CPI back up. The ultimate result of that, of course, would be the RBA having to push rates higher which would counter the decline (if there is one) in the A$!
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