Cpi Surprises On The Downside - Says Deutsche Bank

CPI surprises on the downside says Deutsche Bank

CPI surprises on downside - gives the RBA a little more time to assess the evolution of the domestic and global economies.

Deutsche Bank chief economist Adam Boyton, said "As far as next week's RBA meeting is concerned, we think the Q3 CPI gives the RBA a little more time to consider the evolution of the domestic and global economies. While we think the RBA should increase rates next week, we suspect that it is unlikely on the back of this CPI number."

Looking back to the October minutes the RBA noted that "A year-ended increase of around 3 per cent, with underlying inflation around 2-1/2 2-3/4 per cent, would be consistent with the central forecast scenario".

Deutsche Bank expects that the RBA Board will decide to leave the cash rate unchanged following the conclusion of its meeting next week.

"The decision should, however, remain somewhat 'finely balanced' given the on-going strength in the labour market, a significant increase in nominal unit labour costs and the higher than expected increase in the Producer Price PriceI reported earlier this week. Balanced against that is the rise in the AUD over the past few months and also the lower inflation starting point," said Mr Boyton.

Deutsche Bank's economists believe that the RBA could revise its core inflation forecasts down by a quarter point (i.e. 0.25 ppts) in the SMP due for release on 5 November. Such a downward revision to the RBA's inflation forecasts would also provide a forward-looking justification for not tightening at the November board meeting.

For further information or a copy of the full report, please contact:

Deutsche Bank AG
Name : Michelle Chaperon
Phone: +61 (0) 2 8258 1311
E-Mail: [email protected]

Name : Kate Abrahams
Phone: +61 (0) 2 8258 2416
E-Mail: [email protected]

SOURCE: Deutsche Bank