AUSTRALIA: Other Measures Of Core Price Pressures Also Rose In Q3
The RBA is unsure of the degree of its restrictiveness and if it’s not “mildly restrictive” there could be “implications” for policy as the economy may be at trend growth, according to comments from Deputy Governor Hauser this week. In November, the RBA assumed that around two-thirds of the Q3 underlying inflation increase was temporary but around one-third could be persistent. It was not just trimmed mean inflation that rose but other measures of core price pressures. Our Q3 PCA measure of underlying inflation rose 0.2pp to 2.8% but is still within the band.
- Measures of underlying inflation include trimmed mean, excluding volatile items such as food and energy, the median. We have one using principal components analysis (PCA) based on Bank of Canada research. Unlike Q2, not all of these were within the band in Q3.
- The chart below shows PCA CPI against other measures. It is less volatile, with a standard deviation below trimmed mean’s. After running ahead of trimmed mean from 2019 until mid-2021, it was below trimmed mean, CPI ex volatile items and ex food & energy in Q3.
Australia underlying inflation y/y %
Source: MNI - Market News/ABS/LSEG
- PCA is useful for when there are a large number of variables, as it finds common patterns that explain most of the variance in the data. In this case, it extracts the common movement in prices and thus creates a measure that reflects underlying developments in inflation and not sector-specific shocks.
- The share of CPI components above 3% also picked up in Q3 to 39% from 37% to be in line with Q4 2024.
- The median CPI has been stable through 2025 at just above 2%.
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LOOK AHEAD: Eurozone Timeline of Key Events (Times BST)
| Date | Time | Country | Event |
| 13-Oct | --- | EU | ECB Lagarde and Cipollone at IMF/World Bank Meetings |
| 14-Oct | 0700 | DE | Germany CPI (f) |
| 14-Oct | 0850 | EU | ECB Cipollone Speech on Digital Euro |
| 14-Oct | 1000 | DE | ZEW Current Expectations Index |
| 14-Oct | --- | EU | ECB Lagarde and Cipollone at G20 Meeting |
| 15-Oct | 0745 | FR | HICP (f) |
| 15-Oct | 0800 | ES | HICP (f) |
| 15-Oct | 0840 | EU | ECB de Guindos at Resolution Mechanism Conference |
| 15-Oct | 1000 | EU | EZ Industrial Production |
| 15-Oct | 1900 | EU | ECB de Guindos at Alantra Anniversary Event |
| 16-Oct | 0900 | IT | HICP (f) |
| 16-Oct | 1000 | EU | Trade Balance |
| 16-Oct | 1000 | IT | Foreign Trade |
| 16-Oct | 1645 | EU | ECB Lane in Policy Panel at IIF Annual Meeting |
| 16-Oct | 1700 | EU | ECB Lagarde in IMF Policy Debate |
| 17-Oct | 1000 | EU | EZ HICP Final |
| 18-Oct | 1230 | EU | ECB Cipollone Speech at Euro50Group Meeting |
| 18-Oct | 1400 | EU | ECB Lagarde in Economic Outlook Panel at G30 |
GLOBAL MACRO: Central Bankers Cautious On Stalling Services Disinflation
RBA Governor Bullock at the September 30 press conference and Kansas City Fed President Schmid (FOMC 2025 voter) last week commented on higher services inflation. Given that it reflects domestically-driven factors especially labour costs, as Bullock said, it is a key variable for central banks. They are also monitoring how it is behaving overseas and Bullock noted that it has been sticky and so the RBA needs to be careful. Q3 to date rose in the US and stabilised in the UK and Australia.
OECD services CPI y/y%
- Schmid said that services inflation has been higher than is consistent with meeting the 2% target. Bullock said in Australia that it has been a little higher than the RBA expected and that given its persistency overseas, the central bank will need to look at how far it moderates in its forecasts in the update due 4 November.
- Q3 average-to-date US services inflation is a little higher at 3.8% after 3.7% in Q2. September CPI was originally scheduled for 15 October but has been delayed to 24 October due to the government shutdown.
- Australia’s Q3 average monthly services CPI is steady at 3.4%, higher than the euro area and Canada but lower than the US, UK and Norway. The RBA focuses on quarterly data with Q3 due 29 October.
- UK Q3 average services inflation is stable at 4.9% suggesting that it has stalled at an elevated rate.
- Euro area services price pressures have moderated in Q3 to 3.1% after 3.5% in Q2 and Norway’s are also slightly lower at 3.75% compared to 3.9%.
- Canada is struggling with softer growth and higher unemployment and its services inflation moderated 0.5pp to 2.8% in Q3 to date, the lowest in our group, but even August was in line with July’s 2.8%.
EURUSD TECHS: Corrective Bear Leg Intact
- RES 4: 1.1919 High Sep 17 and a bull trigger
- RES 3: 1.1820 High Sep 23
- RES 2: 1.1779 High Oct 1 and a key short-term resistance
- RES 1: 1.1692 20-day EMA
- PRICE: 1.1618 @ 06:10 BST Oct 13
- SUP 1: 1.1542 Low Oct 9
- SUP 2: 1.1516 76.4% retracement of the Aug 1 - Sep 17 bull leg
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
EURUSD is trading closer to its recent lows. A short-term corrective bear cycle remains intact. Last week’s sell-off resulted in a breach of the 50-day EMA and support at 1.1646, the Sep 25 low, exposing 1.1516, a Fibonacci retracement. Note that MA studies are in a bull-mode position. This continues to highlight a dominant medium-term uptrend. Initial firm resistance is 1.1779, the Oct 1 high. A break of this level would signal a bull reversal.
