There are many ways to dissect the CPI data. In fact as one analyst said to me on Thursday, “…you could make those numbers support any story you like about inflation and the RBA”. That said, we liked the information content in the Tradables/Non-tradables split as a guide to where inflation might go in the next 12-18 months.
The June quarter CPI showed that Tradables inflation rose by 0.3% and was down by 0.7% for the year to the June quarter. This follows falls of 1.2% and 0.4% over the past two quarters. From here on, tradables prices might rise a little due to the lower exchange rate, although this currency effect would be, to a degree, already factored into forecasts by the RBA, as they have been in NAB’s forecasts for some time.
Read the full report: FX Research
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