Australian CPI missed market expectations

The Australian Dollar slipped a little on Wednesday after official consumer price index data came in below expectations. The CPI rose 0.5% in the final three months of 2016 compared to the quarter before, for an annualized gain of 1.5%. The markets had been looking for respective gains of 0.7% and 1.6%. Annual inflation has not been above 2% since the third quarter of 2014. The Reserve Bank of Australia’s mandate is to keep it between 2% and 3% over the economic cycle.

The latest data suggest that price rises are certainly not a problem for the Australian economy at present and that, compared to the RBA’s target, the economy could do with a bit more pricing power. The upshot of this is that higher Australian rates remain unlikely for now even if the record low 1.5% cash rate goes no lower. Foreign exchange markets have clearly spotted that this morning in Asia.CPI inflation has been creeping higher for three straight quarters now, but remains historically low and under the 1.7% level at which it started 2016.

US Industrial Production climbed by 0.8%

Industrial production rebounded in December by posting the strongest advance in two years, though the monthly advance was led by utility output after an unusually warm month. The Federal Reserve said Wednesday that industrial production climbed 0.8% in December, the largest percentage rise since November 2014. The gain follows a steep decline in November, where output fell a revised 0.7%, worse than the previously reported 0.4% decline. Economists polled by MarketWatch had expected a 0.9% rise in December output.

Eurozone CPI up by 1.1%

Euro area annual inflation was 1.1% in December 2016, up from 0.6% in November. In December 2015 the rate was 0.2%. European Union annual inflation was 1.2% in December 2016, up from 0.6% in November. A year earlier the rate was 0.2%. These figures come from Eurostat, the statistical office of the European Union.

UK CPI rose more than expected

The Consumer Prices Index (CPI) rose by 1.6% in the year to December 2016, compared with a 1.2% rise in the year to November. The rate in December was the highest since July 2014, when it was also 1.6%. Price movements for the majority of the broad groups of goods and services acted to increase the rate between November 2016 and December 2016. The main contributors to the increase in the rate were rises in air fares and the price of food, along with prices for motor fuels, which fell by less than they did a year ago.