TD Securities strategists project that the Reserve Bank of Australia’s (RBA) preferred core Consumer Price Index (CPI) will increase by 0.9% quarter-on-quarter in Q2, matching market consensus and rising from 0.8% in Q1. This would bring annual core inflation to 3.7%, which is just below the RBA’s own forecast of 3.8% as stated in its May Statement of Monetary Policy [1].
Additionally, TD Securities expects the June headline CPI to reach 4.2% year-on-year, slightly above the consensus estimate of 4.0%. The strategists highlight that higher rents and new dwelling purchase costs are contributing to upside risks in their inflation forecast [1].
The report notes that if the trimmed mean CPI comes in particularly strong, it could reignite discussions about a potential interest rate hike by the RBA in the near term, especially given the continued resilience of the Australian labor market [1].
No specific market reactions or analyst opinions beyond TD Securities' outlook are mentioned in the article.
CONCLUSION
TD Securities' forecasts suggest that persistent inflation risks, particularly from housing costs, may keep the possibility of an RBA rate hike on the table. The market is likely to closely watch upcoming CPI data for signals on future monetary policy direction.