Yesterday I posted on Westpac and NAB's view on the CPI (due Wednesday) and what it means for the Reserve Bank of Australia meeting

Australian CPI coming up this week

A bit more detail from NAB now, in brief (bolding mine):

  • The August RBA Board meeting is "live" and contingent on Wednesday's Q2 CPI outcome
  • The market consensus outcome for Wednesday's CPI is 0.4% q/q for both headline and underlying, and with that background the market is currently pricing a 69% chance the RBA cuts rates the following week
  • In contrast, NAB's economic modelling of prices and its tracking of goods and services prices points to a close but on hold outcome for the August Board meeting
  • We expect headline inflation to have risen 0.7% q/q, resulting in an annual inflation rate of 1.4%, buoyed this quarter by increases in petrol prices and in fruit and vegetable prices
  • As for the underlying inflation rate, NAB expects that to average a low 0.5% q/q, an outcome that we assess would be sufficient for the RBA to be on hold
  • NAB reads the RBA's May forecast track for underlying inflation as an outcome of 0.4%, so an outcome of around ½% would be a comfortable enough read for the central bank and give it confidence that its forecast of inflation getting back to the 2-3% target band by 2018 remains on track
  • For markets, a core CPI print of below 0.4% for the quarter would further extend market pricing for a 25 basis points rate cut in August. A core CPI print of 0.5% or above would see the market unwind market pricing of an easing

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  • The Q2 COPI data is due at 11.30am local time on Wednesday 27 July 2016 (0130GMT)
  • Market expectations etc. can be found here
  • The RBA next meet on Tuesday August 2.
  • Their decision will be announced at 2.30pm local time (0430GMT)