Commonwealth Bank of Australia: Australia's CPI will slow in Q4 Downside risks to the inflation outlook

Huitong Financial News Australia’s CPI is expected to slow to 4.2% y/y in the fourth quarter. The discounting of goods around Black Friday led to a direct drop in prices, dragging down headline inflation. But at the same time, a slowdown in services inflation is expected. As real household disposable income continues to shrink, further sharp price increases are unsustainable. Various policies will also affect the quarterly figures: the increase in tobacco excise taxes exacerbates inflation, while additional rent subsidies and ongoing electricity subsidies will have the opposite effect. Risks to inflation forecasts are slightly skewed to the downside. This, if in line with or below our expectations, would support the view that policy will remain unchanged in February, as well as the bank’s expectation of starting an easing cycle in September.