Australian Inflation Expectations: Anchoring at the wrong point – ANZ

Dhwani Mehta FXStreet

Analysts at Australia and New Zealand (ANZ) Banking Group, express their view on the Australian inflation expectations after the Consumer Inflation Expectations ticked higher for August.

Key Quotes:

“Market-based inflation expectations, both short and long term, have fallen a lot over the last year.

Worryingly for the RBA, the market now expects inflation to average around 1.5% over the next 10 years and to stay below 2% for around 25 years.

Given the degree to which the inflation swaps curve has fallen and flattened, we think even a small positive headline CPI surprise for the September quarter could see front-end inflation swaps sell-off somewhat. However, for longer-term swap rates to rise materially, we would need to see a number of quarters of annualized core inflation of around 2%. This looks unlikely anytime soon.”

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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