Inflation Miss Dents RBA Hike Bets, Aussie Dollar Sinks
Australia's August inflation report showed a modest undershoot in both headline and trimmed mean inflation, which added to the unwind in hawkish Reserve Bank of Australia (RBA) pricing that began after Governor Michele Bullock's press conference following the bank's interest rate decision on Tuesday.
The headline CPI rose 0.4% for the month and 4.0% over the year compared with expectations for 0.5% and 4.1% respectively, while trimmed mean inflation rose 0.2% against 0.3% expected, with an annual rate of 3.6%, unchanged from July and in line with expectations.
The unrounded index shows a relatively high monthly trimmed mean increase of 0.24%, with the annual rate at 3.57%. The year-on-year rate appears to be rolling over, fitting with Bullock's view that policy settings are now restrictive.
The market is showing a clear inclination to jump on even the smallest dovish signal after what had been a very significant hawkish move in RBA pricing, and that's exactly what we've seen following the inflation report. The implied probability for a 25 basis point hike at the RBA's next meeting on November 3 now sits at just 20%, down from 44% last week.