The latest CPI figures have lent some credibility to the prospect of another rate cut this year. Figures for the December quarter have been released by the ABS and both headline and seasonally-adjusted figures were weaker than the market expected. Headline inflation was 0.5% over the quarter and 1.5% over the year to December. Seasonally-adjusted figures give the same results as the headline figures. Markets had expected a quarterly figure of 0.7% and an annual figure of 1.7%.
“Core” inflation measures favoured by the RBA, such as the “trimmed mean” and the “weighted median”, were slightly below consensus. For the quarter, both the trimmed-mean and the weighted-median increased by 0.4% and the average of the two 12 month rates came to 1.6%. The RBA aims to return core inflation back to its preferred range of 2%-3%.