Australian Consumer Price Index (CPI) higher than expected
23 January 2008
The Australian Consumer Price Index (SPI) for Q4, 2007 was released today, with the data coming in higher than expected overall. The RBA pays close attention to the underlying CPI measure in deciding interest rate policy. The AUD moved higher in immediate reponse to the release.
In spite of the US Federal Reserve's 0.75% interest rate cut overnight, the RBA maintains a tightening bias. Today's CPI figures will give the RBA no comfort whatsoever - the next RBA rate announcement is 2.30pm AEST on 5th February. We expect the RBA will hike rates 0.25% on the 5th, although it will be a close call.