Australia: Inflation expected to remain at 1.75% through to H2 2019 - TDS

Analysts at TDS suggest that ahead of Australian CPI tomorrow, there are plenty of questions with regards to AUD and RBA projections.

Key Quotes

“Last projections were in Nov, where the assumption for the exchange rate was US$0.77 and TWI of 65. While the AUD is much higher at US$0.81, the RBA can say that this is “partly reflecting a lower USD” as the TWI yesterday was 65.7, not a deal breaker.”

“Secondly, in Nov, the RBA slashed its projection for underlying inflation by +0.4% pts across the board, such that it is expected to remain at 1.75% through to H2 2019. We suspect that this is an over-reaction to the new weights, as the RBA cannot possibly know what is going to get “trimmed out” of inflation each quarter.”