Q1 truncated average CPI fell for the first time after the end of 2012 in the 2-3% RBA. Compromise of growth/stability is likely to favor more RBA cuts on the growth winds of US tariffs. Markets on the pencil for additional 25 Mbps at the May RBA meeting, waiting for a break and reducing the project of the RBA terminal rate to 3.60% to Q3-2025 (formerly 3.85%), mediated by Nicholas Chia, an economist at Chartered.
Background of growth stability that favors more cuts
“The Australian Q1 CPI was a mixed bag. Inflation of headlines rose 2.4% A/A, in our estimation, compared to 2.2% growth (Bloomberg: 2.3%). Calculated average CPI, Australian Reserve Bank (RBA) Preferred Action Inflation, increased by 2.9% per annum. Under 2-3%of the goal (Figure 1).
“We all think that the RBA can comfort the extensive relief of price pressure through a cropped average dimension; predicts that the terminal trimmed average CPI is 2.7% of the Q2, based on the then indirect price road in February.
“Therefore, we reduce the rate of RBA terminal policies by 3.60% in the first quarter (formerly 3.85%). We do not exclude quarterly cutting, but much depends on trade speeches and the United States selects their tariff management. We assume that RBA is in May, The relaxation bar is now higher, given the significant headwind of economic growth.
