The US March CPI and Australia’s trimmed mean inflation rate

Plus, Australia’s G20 Brisbane Action Plan revisited

The Reserve Bank of Australia building at 65 Martin Place, Sydney undergoing extensive renovations. It is not just the building that is set for renovation, with the RBA review set to drop soon. Photo credit: Stephen Kirchner.

The US March CPI came in at just 0.1% m/m and 5% y/y, down from 6% in February. The rapid moderation in headline inflation is good news, although markets were somewhat thrown off by the stronger than expected core reading of 0.4% m/m, with the core annual rate accelerating from 5.5% to 5.6%. But the measures of central tendency, namely the trimmed mean and median measures, fell faster than the core.

The Cleveland Fed’s trimmed mean came in at 0.2% m/m and 6.2% y/y compared to 6.5% y/y in February. As long-time readers will know, we have been using the Cleveland Fed measure to forecast Australia’s quarterly trimmed mean inflation rate. The inflation scare that followed the release of the US January CPI has now abated. We previously raised the prospect that this upside inflation surprise in January would push the peak in the Australian inflation process into Q1. That risk has receded, but only just. Whereas the US January CPI release had pointed to a 1.7 q/q print for the Australian Q1 trimmed mean measure, that moderated to 1.6% q/q with the US February print and now 1.5% q/q with the March print. That would leave trimmed mean inflation running at 6.8% y/y compared to 6.9% in the final quarter of 2022.