Australia’s September-quarter inflation figures will be released as Reserve Bank governor Michele Bullock and senior officials face a Senate estimates hearing, creating a rare opportunity to gauge the central bank’s reaction before its next rate decision.
The data could influence expectations of an interest rate rise at the Reserve Bank’s November 3-4 meeting, with some traders already betting on a Melbourne Cup day increase.
Particular attention will be paid to the quarterly trimmed mean, the Reserve Bank’s preferred measure of underlying inflation. Citi economists Josh Williamson and Faraz Syed expect it to rise by 1 per cent, which would imply annual growth of about 3.6 per cent.
That would be above the central bank’s August forecast, which indicated an increase of about 0.8 per cent for the quarter. The economists said, however, that the result might not alter the board’s decision.
They pointed to comments from deputy governor Andrew Hauser at a Citi conference last Wednesday, when he said the inflation outlook appeared “materially worse”. Citi said the remarks suggested even a quarterly trimmed mean result of 0.9 per cent could be enough to secure a rate rise.
Financial markets moved sharply after Mr Hauser’s comments, with pricing for a November increase rising above 50 per cent.
Expectations had previously been reduced by weaker employment data, which suggested conditions in the labour market were also deteriorating. The Reserve Bank is tasked with balancing price stability and full employment.
NAB economists nevertheless expect the cash rate to remain at 4.6 per cent, despite also forecasting a 1 per cent rise in the trimmed mean measure.
NAB senior economist Taylor Nugent said there was sufficient evidence of below-trend economic growth and a gradual easing in the labour market to support a return of inflation to target as the fuel cost shock fades.
Further indications of the Reserve Bank’s assessment of the economy are expected when chief economist Sarah Hunter appears in a pre-recorded interview on Nine’s 60 Minutes on Sunday evening.
Assistant governor Brad Jones is also due to appear on a panel at the AFR Super and Wealth Summit on Monday, although the discussion is expected to focus more heavily on the central bank’s ban on card surcharging than on monetary policy.
