Markets Steady Despite CPI Upside

• The Monthly CPI Indicator came in much stronger than expected, lifting to 2.8% year-on-year from 1.9%, well above the 2.3% consensus.
• Underlying inflation also showed momentum, with the Trimmed Mean rising to 2.7% after readings of 2.1% in June and 2.4% in May.
• Much of the upside was linked to the timing of electricity rebates and swings in travel-related prices.
• Policymakers have previously cautioned that the first month of a new quarter can be volatile and less reliable, with greater weight placed on the full quarterly CPI update.
• Markets adjusted only slightly, with September pricing easing back to around 5bp of cuts from 7bp, while expectations for November remain unchanged with a full 25bp reduction still implied.