Australia’s Consumer Price Index (CPI) increased by 3.6% year-over-year (YoY) in December, a slight rise from the previously revised figure of 3.5% (up from 3.4%), according to data released by the Australian Bureau of Statistics (ABS) on Wednesday.
The reported growth matched market expectations of 3.6% for the period.
The Reserve Bank of Australia’s (RBA) Trimmed Mean CPI for December saw a monthly increase of 0.2% and an annual uptick of 3.3%. In December, the monthly CPI registered at 1.0%, surpassing the previous reading of 0% and expectations of 0.7%.
Additional insights reveal that the Quarterly CPI surged by 1.0% quarter-over-quarter (QoQ) and 3.8% YoY in the fourth quarter (Q4). Meanwhile, the Quarterly RBA Trimmed Mean CPI rose 0.9% QoQ and 3.4% YoY during the same timeframe, both exceeding market predictions.
Market Response to CPI Data
Following the inflation data release, the Australian Dollar (AUD) drew some buyers, with the AUD/USD pair up by 0.04%, trading at 0.7010 at the time of reporting.
Market Expectations for CPI Release
Analysts had forecasted the Australian CPI to show a YoY rise of 3.6% in December, reflecting an increase from November’s reading of 3.4%. The monthly CPI was expected to be around 0.7%, recovering from a stagnant November.
With the RBA’s monetary policy meeting scheduled for February 2-3, inflation data is anticipated to confirm the market’s expectation of an impending rate hike by the central bank. Solid job growth and a drop in the unemployment rate to 4.1% have bolstered these expectations.
Potential Impact of CPI on AUD/USD
If inflation data aligns or exceeds expectations, it is likely to affirm the RBA’s hawkish stance, potentially strengthening the AUD further. Conversely, if annual inflation falls below 3%, it might lead to a decline in AUD/USD as speculation around a rate hike diminishes.
