Inflationary expectations remain well contained: Westpac's Justin Smirk
GUEST OBSERVER
The Melbourne Institute (MI) Inflationary Expectations are reported as a 30% symmetric trimmed mean utilising all responses except for the ‘don’t know’ responses. Compared to the previous old trimmed mean, this adds 2ppt to the level of the index (below).
But the new series appears to express greater cyclical amplitude (charts below) which can be useful for picking turning points in the inflation cycle.
Click to enlarge
In September, consumer expectations for the annual pace of inflation lifted to 3.5% from 3.2% and now on a moderating trend since the 4.0% print in May 2014. The trend is now 3.4%yr and has been so since April 2015. Expectations continue to remain well below the average since 1995 of 4.5% (chart below).
Inflationary expectations remain well contained. Despite an expectation for some pass-through to consumer goods from the weaker Australian dollar, we are yet to see these have any impact on consumers’ inflationary expectations.
Justin Smirk is senior economist, Westpac Group and can be contacted here.