Australia: CPI surprise unlikely to last – ANZ

Both headline and trimmed mean inflation surprised to the high side, reflecting stronger than anticipated food prices, economists at ANZ Bank brief. AUD/USD is sitting above the 0.65 level.

Key quotes

“While headline inflation was stronger than expected, the 0.3% q/q gain in prices is still well below the 0.7% rise in the previous quarter.”

“Tradeable prices were down, falling 0.2% q/q. The fall was primarily from fuel but also international holidays, travel and accommodation, which fell 3.0% q/q. Non-tradables, on the other hand, were up 0.6% q/q, which was largely due to tobacco prices (up 2.0% q/q) and secondary education (up 3.4% q/q).”

“Q2 is shaping up to see the largest fall in prices in the history of the series as a variety of factors come together. Therefore, we could see annual headline inflation go negative in Q2.”