Australia’s inflation likely to fall further

Falling commodity prices and slowdown in China are the biggest challenges ahead of Australia. Free fall of crude oil prices put direct impact on the February's SoMP calculation. Societe Generale estimates that the February forecast round will be based on a price Brent of US$35pb vs US$52pb in November. 

While taking the current scenario in to consideration, RBA's quarterly statement on monetary policy is likely to downgrade inflation outlook but the growth outlook will surely be revised higher. Same way, the lower level of the unemployment rate and weak Australian dollar is also likely to support inflation. Moreover exchange rate assumption is likely to be unchanged in the February SoMP from the November edition.