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28 Jan 2015
Australia's Q4 core CPI slightly above consensus - Westpac
FXStreet (Bali) - Australia's calendar is dominated by Q4 CPI (00.30 GMT), notes Westpac, expecting a sub-consensus headline inflation reading but slightly above-consensus core CPI print.
Key Quotes
"Australia’s calendar this week is dominated by Q4 CPI (11:30am Syd/8:30am Sing/HK). Westpac looks for a sub-consensus headline inflation reading but slightly above-consensus core CPI print, leaving the market divided over the RBA’s likely move next week."
"We look for the overall CPI to have risen just 0.1% q/q, 1.6% y/y. Weighing in Q4 are outright falls in petrol prices, fresh fruit & vegetables and pharmaceuticals (the latter however is seasonal, with Q1 to rebound as usual). Housing and tobacco should make the largest positive contribution. Consensus is 0.3% q/q, 1.8% y/y."
"But as usual, the key for the RBA should be the core inflation rates. We expect both the trimmed mean and weighted median measures to rise 0.6% q/q, 2.3% y/y. The median forecast on Bloomberg is 0.5% q/q. We would probably need to see 0.4% or lower on the average of the core measures to see a sharp increase in pricing for an RBA cut next week from the current 40% chance. But if the RBA is inclined towards a rate cut next week, it would justify a move by looking forward to subdued price pressures over the next 1-2 years."
"The Westpac MNI China consumer sentiment (released 12:45pm Syd/10:45am local) this month has less exposure to news events than the Dec print. The disappointing Q4 GDP and losses in equities related to margin loans could come through to weigh on sentiment. The Bank of Thailand will decide on the benchmark rate, released 6:30pm Syd/3:30pm Sing/HK. While most of the surveyed economists are forecasting for the rate to remain at 2.00%, there is some risk to the downside. We will also see the Malaysian overnight policy rate after the local close. All forecasts are for the BNM to keep the rate unchanged at 3.25%."
"The FOMC releases only the single page statement at 2pm NY. The Dec statement included a clumsy segue from “a considerable time” before rates rise to “patient in beginning to normalize” rates, including both phrases. Presumably only “patient” will appear this time. The commentary on the economy should not change much and it is standard practice to make no mention of foreign developments. The voting rotation has changed, with Lacker a potential dissenter on the hawkish side to replace Plosser and Fisher who dissented in Dec and Kocherlakota’s dovish dissent not likely to be revived by the new roster. USD should not suffer any sustained damage on the release."
Key Quotes
"Australia’s calendar this week is dominated by Q4 CPI (11:30am Syd/8:30am Sing/HK). Westpac looks for a sub-consensus headline inflation reading but slightly above-consensus core CPI print, leaving the market divided over the RBA’s likely move next week."
"We look for the overall CPI to have risen just 0.1% q/q, 1.6% y/y. Weighing in Q4 are outright falls in petrol prices, fresh fruit & vegetables and pharmaceuticals (the latter however is seasonal, with Q1 to rebound as usual). Housing and tobacco should make the largest positive contribution. Consensus is 0.3% q/q, 1.8% y/y."
"But as usual, the key for the RBA should be the core inflation rates. We expect both the trimmed mean and weighted median measures to rise 0.6% q/q, 2.3% y/y. The median forecast on Bloomberg is 0.5% q/q. We would probably need to see 0.4% or lower on the average of the core measures to see a sharp increase in pricing for an RBA cut next week from the current 40% chance. But if the RBA is inclined towards a rate cut next week, it would justify a move by looking forward to subdued price pressures over the next 1-2 years."
"The Westpac MNI China consumer sentiment (released 12:45pm Syd/10:45am local) this month has less exposure to news events than the Dec print. The disappointing Q4 GDP and losses in equities related to margin loans could come through to weigh on sentiment. The Bank of Thailand will decide on the benchmark rate, released 6:30pm Syd/3:30pm Sing/HK. While most of the surveyed economists are forecasting for the rate to remain at 2.00%, there is some risk to the downside. We will also see the Malaysian overnight policy rate after the local close. All forecasts are for the BNM to keep the rate unchanged at 3.25%."
"The FOMC releases only the single page statement at 2pm NY. The Dec statement included a clumsy segue from “a considerable time” before rates rise to “patient in beginning to normalize” rates, including both phrases. Presumably only “patient” will appear this time. The commentary on the economy should not change much and it is standard practice to make no mention of foreign developments. The voting rotation has changed, with Lacker a potential dissenter on the hawkish side to replace Plosser and Fisher who dissented in Dec and Kocherlakota’s dovish dissent not likely to be revived by the new roster. USD should not suffer any sustained damage on the release."