Michael Plumb, Head of Economic Analysis at the Reserve Bank of Australia, said the RBA will keep using quarterly Consumer Price Index (CPI) inflation data for forecasting. He said the bank has also been using monthly CPI to assess underlying inflation measures.
The RBA remains focused on the quarterly Trimmed Mean, with any move away from it expected to be some way off. The bank aims to decide which underlying inflation measures from monthly data it would use if quarterly CPI were no longer the main reference.
Quarterly Cpi Remains The Primary Market Catalyst
Plumb said the RBA will consult widely and explain its thinking before making any decisions. He also said much of the inflation rise is specific to certain sectors and that price pressures are expected to ease in coming quarters.
He added that labour market conditions are adding to the inflation rise. At the time of writing, AUD/USD was 0.38% lower on the day at 0.7055.
Given the clear focus on quarterly CPI data, we should anticipate that the most significant market volatility will cluster around these releases. The next key date for traders will be the first quarter 2026 CPI announcement in late April, making the intervening weeks a period of positioning. Any derivatives expiring before then will likely trade on a different volatility profile than those expiring after the data is public.
We see that underlying inflation is being watched on a monthly basis, which can create smaller trading opportunities. The latest monthly CPI indicator for January 2026 showed a slight easing to 3.2% year-on-year, reinforcing the view that price pressures are indeed starting to dissipate. This trend supports strategies that bet on lower interest rates or a weaker Australian dollar in the short term.
Trade Structure Around The Late April Cpi Event
The expectation for inflation to cool down suggests the Reserve Bank’s next move is more likely a rate cut than a hike, weighing on the AUD/USD, which is already trading near 0.7055. This environment is favorable for buying AUD put options or establishing bearish credit spreads to capitalize on further downside or range-bound action. Looking back, this marks a significant shift from the hawkish stance we saw through much of 2025.
However, the mention of labor market pressure adds a layer of caution to this outlook. Australia’s unemployment rate remains low, holding at 4.0% in the latest release, which could keep wage growth and services inflation persistent. This risk means that overly aggressive bearish bets could be vulnerable to any surprise strength in upcoming jobs data.
Therefore, the primary strategy involves structuring trades around the late April CPI release. We should consider buying volatility through instruments like straddles, as implied volatility on the Australian dollar is likely to increase substantially heading into that event. The current subdued period presents an opportunity to enter such positions at a relatively lower cost.
