The Reserve Bank of Australia is probing underlying inflation indicators derived from recently released monthly data to see whether one or more of those measures could serve as a preferred guide for monetary policy in future, a senior RBA official said on Tuesday.
Speaking at an event in Sydney, Michael Plumb, head of the economic analysis department at the RBA, said the central bank's present focus remains on quarterly data and that it will continue to use the "trimmed mean measure" to assess underlying inflationary pressures.
"That said, we have also been analysing underlying inflation measures constructed using the monthly data," Plumb told the audience. He added that as additional monthly readings become available, the bank aims to determine "which underlying inflation measures from the monthly data will be preferred in a post-quarterly CPI world."
Plumb stressed that any shift in the preferred gauge would not be immediate. He said policymakers would outline their thinking in advance of taking any formal decision, indicating a deliberate and communicative approach to potential change.
The RBA was compelled to lift interest rates by a quarter-point this month to 3.85% after inflation reaccelerated following three rate cuts last year. Despite the introduction of monthly CPI figures, the central bank has emphasised it will continue to rely on the quarterly trimmed mean measure to gauge inflation trends.
Officials have noted that the new monthly series can be volatile and that it will take time for seasonal adjustment processes to mature and provide a reliable basis for policy use. That observation underlines why any transition away from the quarterly measure would be gradual, Plumb said.
In sum, the RBA is actively evaluating monthly-based measures of core inflation while maintaining its present analytical focus. The bank's recent rate increase to 3.85% reflects the committee's response to renewed upward pressure on inflation, and authorities signal they will communicate clearly before adopting any new measurement framework.