CPI edges higher but core inflation remains unchanged

Posted on January 29, 2020 by Pete Faulkner - Inflation, Uncategorized

The final quarter of 2019 has seen headline CPI increase by 0.7% q/q for a year-on-year increase hwich has edged up to 1.8%. This is unchanged from where we started the year and remains below the RBA’s target range of 2-3%. Nevertheless the RBA will no doubt be moderately pleased to see this recent slight increase in inflation given the fact that they halved the cash rate from 1.5% to 0.75% during 2019.

Unfortunately the measure that the RBA pay rather more attention to (core inflation) has shown no such upward trend. Average core inflation remains stuck at 1.45% y/y; below the 1.8% where it finished the previous year.

What increases we have seen in CPI during 2019 have been clearly driven by price increases in Tradable goods; here we have seen the annual rate increase during 2019 from 0.6% to 1.7%. Non-tradables, on the other hand, have declined from 2.4% to 2.0% over the year.