May 2023 Inflation

We got a misleading monthly inflation print today.

For May 2023: 
💙 Headline inflation was 5.6% (⬇️ 1.2%)
💙 Core inflation was 6.1% (⬇️ 0.7%)
💙 Inflation excluding volatile items was 6.4% (⬇️ 0.1%)

The big fall in headline inflation is certainly encouraging, and what the media will focus on, but it was driven by large moves in volatile categories like transport fuel and holiday travel. Inflation excluding those volatile items saw very little movement.

There is still a lot of stickiness in underlying inflation and big increases in electricity, insurance and rents still to flow through to the CPI next financial year mean we are a long way from getting inflation back into the target range.

That being said, this print does show things heading in the right direction and strengthens the case for the RBA sitting on their hands in July and waiting for another month of data. In particular I'd be keen to see what unemployment does next month before making a call on further rate rises.