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How The June Quarter CPI Number Affects Financial Markets

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

How the June Quarter CPI number affects financial markets?

The Australian Bureau of Statistics (ABS) released the consumer price index (CPI) for the June quarter 2019. The data released by the ABS showed a CPI movement of 0.6 per cent in June quarter 2019 relative to the March quarter 2019. This is an increase from the previous December 2018 to March 2019 quarter that showed a CPI movement of 0.0 per cent. The June quarter 2019 increase of 0.6 per cent is slightly higher than the market’s consensus forecast of 0.5 per cent.


The June quarter 2018 to June quarter 2019 showed an annualised CPI movement of 1.6 per cent, while the March quarter 2018 to March quarter 2019 showed an annual CPI movement of 1.3 per cent. This upward movement is expected because the March quarter result was so low.

One of the goals of the Reserve Bank of Australia (RBA) is to maintain the inflation rate between 2 – 3 per cent range. The RBA tries to achieve this goal through the use of the monetary policy. If inflation is below this target, the RBA could use an expansionary monetary policy to increase the general price level. In contrast, if inflation is above the target, the RBA could use contractionary monetary policy, to reduce the general price level.

With the annual inflation rate of 1.6 per cent being below the RBA inflation target of 2 – 3 per cent, investors expect the RBA to further reduce the cash rate over the next six months or so. Today’s CPI number does not change this expectation. The cash rate is currently at 1.00 per cent, following the last two 25 basis point reductions in the cash rate over the last two meetings of the RBA Board.

Finally, the equity market’s initial reaction to the release of the June quarter CPI number is broadly neutral as the June quarter CPI number is only slightly above market expectations.




This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978) (“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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