CPI in Focus

• July CPI is due today, with headline expected at around 3.2% over the year, down from 3.8%, and trimmed mean expected at 3.5%. The improvement overstates the easing in current inflation pressure, largely reflecting base effects from last July’s increases in electricity and holiday travel prices.
• The RBA minutes showed the Board remains concerned about upside risks to inflation, with the decision to hold at 4.35% unanimous but some members judging further tightening could be required if risks materialise. No further hikes are priced this year.
• Oil fell on hopes of de-escalation in the Middle East, with Brent down 5%, and yields followed as fears of sustained energy price pressure eased. The move was led at the short end and ran through the UK and Europe before reaching the US, where the 10yr fell to 4.63%.
• US data added to the move, with consumer confidence easing to 89.4 in August and new home sales falling 10.5% in July, the signs of cooling demand modestly paring Fed hike expectations.