Stephen Miller
For those looking for some mortgage relief, yesterday’s release of the January consumer price index (CPI) didn’t make for pleasant reading.
The best thing that might be said about yesterday’s release is that it probably wasn’t that different to any expectation the RBA may have held.
The current RBA forecast has trimmed-mean CPI inflation coming in at an annual 3.7 per cent to the June quarter 2026. That implies something close to 0.9 per cent in the March and June quarters.
Yesterday’s release was by and large consistent with that.
Of course, the real question is whether attainment of the RBA forecast is sufficient to forestall a further hike, at least in the absence of an unforeseen deterioration in the labour market.
That is not yet clear but in her “fireside chat’ last night, RBA Governor Bullock noted that judgements on the path of monetary policy had become “more difficult” and suggested a “patient” approach to decision making was apposite given a lack of clarity on the balance of risks between inflation and the labour market.
She described the current circumstance as one “where the labour market…is a little bit tight and inflation is a bit elevated”.
Those comments suggest to me that the current thinking of the RBA Monetary Policy Board is to leave the policy rate unchanged when it meets in March, but that May is a “live” meeting. A “patient” approach would give the RBA time to assess not only the implications of more inflation data but gain some insight as to how other potential drivers of inflation (wages, fiscal policy etc.) are unfolding.
Given that the RBA increased the policy rate in February that seems appropriate.
The forgoing therefore points to the May meeting as the critical decision juncture.
By Stephen Miller, investment specialist
