Australia: Soft CPI supports ongoing neutral RBA tone - TDS

Australia’s Q3 core CPI rose by +0.35%/qtr and remained at +1.9%/yr, softer than TD and mkt expected (2%/yr) although still consistent with the RBA’s projection of 2%/yr by year end, points out the research team at TDS.

Key Quotes

“The AUD sank 50pips ($US0.778 to $US0.773) on the report, while 3yr and 10yr yields fell by 4-5bps.”

“While the rise in core inflation from the 2016 lows paused in this report, the strong composition of the labour market is expected to support higher wage inflation in due course. We remain with our base case of +25bp in May 2018, although OIS is not fully priced for +25bp until November 2018.”