Reserve Bank of Australia (RBA) Trimmed Mean Consumer Price Index (CPI) q/q

Reserve Bank of Australia (RBA) Trimmed Mean Consumer Price Index (CPI) q/q reflects the weighted average percentage change in prices for goods and services in the reported quarter compared to the previous one. 15% of the consumer basket elements with the smallest price change values and 15% with the largest ones are excluded from the index calculation. Consumer inflation is evaluated based on the remaining set.

This is one of alternative approaches to evaluating core inflation. The rationale for this "trimming" is that there are sometimes very large or very small changes in the prices of particular goods. This may have a significant effect on a conventional average of all price changes. Such changes however are unrepresentative of price changes of other goods and services. Moreover, expenditure items with very large weights in the CPI basket can add volatility to the average values. For all the above reasons, such "noise" items are excluded from the calculated sample.

This modification to the CPI calculation was proposed by the Reserve Bank of Australia. The RBA's governing council needs the most objective assessment of consumer inflation. In turn, it is consumer inflation that is considered one of the main factors in the RBA's interest rate change.

An increase in the trimmed mean CPI may have a positive effect on the Australian dollar quotes.