What’s in store for the December quarter CPI print?

The Reserve Bank of Australia’s (RBA) fight against inflation appears to be going well. The September quarter’s Consumer Price Index (CPI) data returned at 2.8 per cent, while the recent December monthly CPI printed even lower at 2.3 per cent (beneath the RBA’s “midpoint” target of 2.5 per cent).

Despite these encouraging revelations, the RBA has still been reticent in delivering what would be the first cash rate cut since 4 November 2020, saying that it is still reliant on emerging data and the evolving nature around economic risks and uncertainty.

It is for these reasons that the upcoming December quarter CPI data is being viewed as crucial in what the RBA may decide during the first monetary policy meeting of the year.

What are economists expecting?

According to ANZ’s economics team, trimmed mean inflation is expected to print at 0.5 per cent q/q, marking the lowest quarterly result since 2Q21, and would see the annual rate decline 0.3 percentage points to 3.2 per cent y/y, below the central bank’s 3.4 per cent forecast.

“The six-month annualised rate for trimmed mean inflation is forecast to fall to 2.6 per cent, around the middle of the target band,” it said.

“With the RBA Board’s post-meeting statement in December noting it was ‘gaining some confidence that inflation is moving sustainably towards target’, we think that a downside surprise to the RBA’s published forecasts, in line with our expectations of a 0.5 per cent q/q print for the trimmed mean, will see the RBA cut in February.”

Meanwhile, according to Westpac senior economist Justin Smirk, the major bank’s 4Q24 CPI near-cast is 0.3 per cent q/q and 2.5 per cent y/y. Smirk said that various energy rebates and cost-of-living relief measures have “helped drive headline inflation to the mid-point of the RBA’s target band”.

Westpac’s trimmed mean estimate for the quarter is 0.6 per cent, with the annual pace lowering to 3.3 per cent from 3.5 per cent.

Stephen Wu, senior economist at the Commonwealth Bank of Australia (CBA), said that while the 3Q24 inflation figures were a welcome easing in inflation, they “simply weren’t low enough to spur the RBA into earlier action”.

CBA has forecast headline CPI to rise 0.2 per cent q/q in 4Q24, bringing the annual rate down from 2.8 per cent to 2.4 per cent, below the midpoint of the RBA’s coveted 2–3 per cent target range.

“It’s worth pointing out a weak 0.5 per cent/qtr outturn, if realised, will stay in the annual rate calculations for a year,” Wu said.

“That should mean underlying inflation returns to the RBA’s 2-3 per cent band at least one quarter earlier than currently anticipated by the RBA.

“The RBA will need to incorporate the Q4 24 trimmed mean outcome into its updated forecasts, released on the day of the February Board decision (18/2). A downward revision to the RBA’s inflation profile therefore seems more likely than not.”

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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