Inflation data will shape future interest rate direction: Pete Wargent

There are two very interesting data releases due out on Tuesday.

 

Firstly the regional population growth figures, which shed more light on where people have been migrating from and to in Australia, which is always very informative. 

 

And then there is the big one: inflation!

I looked here at the last round of inflation numbers, released in January. 

 

This is clearly going to be a vital data series because it shows whether the Reserve Bank of Australia (RBA) is on target to get inflation back up to its mandated target. 

 

With housing market activity now easing, it will be very interesting to see whether inflation is still on course to rise towards the target over the next couple of years, or whether there will be further downward pressure on interest rates. 

 

The rhetoric from the RBA has been very clear: it doesn't want to cut rates further under any circumstances, unless it absolutely has to. 

 

Over the year to December, underlying inflation rose +1.87 per cent, which was yet again under the 2 to 3 per cent target range.

Very soft inflation has been a feature of the economy since the end of 2015.

There doesn't seem to be a whole lot of pressure on rents at the moment, which is one contributory factor.

Some of the sources of the inflation that has been in evidence have been in fuel costs, energy, education, and 'sin taxes' on alcohol and tobacco.

Market forecasts

Bloomberg released its survey of 20 economists for the March 2018 quarter.

 

It showed a market median consensus for a quarterly result of +0.5 per cent, which would put annual underlying inflation at about the same level at +1.85 per cent.

 

However, some forecasts see a bit of downside risk, most notably AMP.

Stay tuned for that, and more analysis here on this blog, from 11.30am on Tuesday.

 

If you like investment property or continued low mortgage rates, say to yourself a silent prayer for a benign print!