Australia's CPI hit 4.0% but trimmed mean stayed at 3.6%. Which inflation measure do you follow?

The Australian Bureau of Statistics reported on 30 September that annual CPI inflation rose to 4.0% in August from 3.5% in July, with housing up 5.7% and automotive fuel up 14.8% on the month. Trimmed mean inflation stayed at 3.6% for a third month in a row. The ABS said the monthly fuel rise was driven by higher world oil prices and the end of the federal government's fuel excise relief measures (full report).

The Reserve Bank of Australia says it prefers the trimmed mean as its guide to underlying inflation, yet it raised the cash rate to 4.60% on 29 September, a day before the CPI release, and said some upside risks to inflation were materialising (report). That raises a practical question for anyone trading the Australian dollar: which measure should you watch?

• Do you follow the headline CPI, the trimmed mean, or both? Which one moves AUD/USD more in your experience?
• When the two diverge, as they do now, do you side with the central bank's preferred measure or with what the market reacts to?
• Do you adjust for one-off items such as fuel excise changes, or do you take each print at face value?
• How do you use the monthly CPI now that it is a full monthly series, compared with when it was only quarterly?

CPI explained covers headline and core measures in general.

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