Australian Dollar: Inflation risks keep hike debate alive – TD Securities

TD Securities strategists expect the Reserve Bank of Australia’s (RBA) preferred core Consumer Price Index (CPI) to rise 0.9% q/q in Q2, matching consensus and up from 0.8% in Q1. This would lift annual core inflation to 3.7%, just below the RBA’s 3.8% projection. They also see headline CPI at 4.2% y/y in June, with higher rents and dwelling costs posing upside risks.

Core CPI forecast supports RBA debate

"We forecast RBA's preferred core CPI measure to rise by 0.9% q/q (consensus: 0.9%, Q1: 0.8%) in Q2, in line with consensus."

"This lifts the annual rate to 3.7%, which is slightly lower than the RBA forecast of 3.8% in its May Statement of Monetary Policy."

"We also forecast the June headline CPI to print at 4.2% y/y (consensus: 4.0%)."

"Higher rents and new dwelling purchase costs pose upside risks to our forecast and a hot CPI trimmed mean will ignite debate around another hike in the near-term as the labor market remains resilient."