Reserve Bank of Australia (RBA) Trimmed Mean Consumer Price Index (CPI) y/y measures a weighted average percentage change in prices for goods and services in the reported quarter compared to the same quarter of the previous year.
This is one of alternative approaches to evaluating core inflation. 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.
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.
The chart of the entire available history of the "Reserve Bank of Australia (RBA) Trimmed Mean Consumer Price Index (CPI) y/y" macroeconomic indicator. The dashed line shows the forecast values of the economic indicator for the specified dates.
A significant deviation of a real value from a forecast one may cause a short-term strengthening or weakening of a national currency in the Forex market. The threshold values of the indicators signaling the approach of the critical state of the national (local) economy occupy a special place.
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