AUD: Sticky CPI backs further RBA hike – TD Securities

TD Securities’ Global Strategy Team highlights that Australia’s January CPI remained elevated, with both headline and trimmed mean inflation above consensus. The report stresses that price pressures are still sticky, driven by housing and electricity costs, while some recreational and transport prices eased. The strategists argue the RBA likely needs another rate hike, with May seen as the next key opportunity.

Elevated inflation keeps RBA under pressure

"As we expected, Australia headline CPI stayed elevated in Jan, at 3.8% y/y (cons: 3.7%, prior: 3.8%). Trimmed mean inflation (i.e., core inflation) also edged higher to 3.4% y/y (cons: 3.3%, prior: 3.3%)."

"On a m/m seasonally adjusted basis, headline CPI accelerated to 0.5%, faster than the 0.2% m/m pace seen in the prior 2 months."

"The acceleration was led by housing prices due to the surge in electricity costs from the roll-off of the Commonwealth and state-level electricity rebates. New dwelling and rents also registered a faster pace of increase in Jan."

"On the flip side, a retreat in recreational prices and transport prices were the positives in today's CPI report."

"Overall, Jan CPI reflect that price pressures remain sticky and the RBA needs another follow-up hike."

"Question is on timing and we think May is the next best opportunity."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)