Underlying CPI rates averaged a 0.7% q/q rise and 2.2% yoy (both NAB and market at 0.5% q/q). The q/q outcome was above economists’ forecasts but the y/y rate was right in line with expectations. Market pricing expected a lower q/q outcome and “whispers” of an even lower one, and so the $A has bounced along with a sharp reduction in RBA easing expectations for February. Headline CPI rose 0.2% in Q4 for 1.7% yoy (NAB -0.1%, Market +0.3%) – petrol prices fell nearly 7% in the quarter and will likely decline around 20% in Q1 driving a Q1 quarterly outcome in the order of -1% q/q. Surprises were broad strength in services prices and generally stronger food prices. There was limited evidence of broad-based pass through from the declining $A, but there was an influence on some items.
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