The big RBA forecast miss on Q3 inflation
Inflation spiked in Q3, posting one of the largest ex-COVID increases in the inflation targeting era, well above the RBA's forecast.
Outside of COVID, this was one of the highest readings on inflation since the RBA began targeting inflation in 1993.
With quarterly inflation revised up from 0.6% to 0.7% in Q2, this meant that the RBA staff’s forecast miss for annual underlying inflation in Q3 was 0.5pp.
Excluding a couple of extremes in inflation during COVID, this was the largest upside surprise for a current-quarter forecast since late 1992.
It was also one of the RBA’s largest forecast misses in absolute terms on record.
The Fed and the ECB’s forecast errors are a little smaller than the RBA’s errors, although to be fair the comparison is not like-for-like and flatters the forecasting ability of the Fed and the ECB.
Author's summary: RBA's Q3 inflation forecast missed by 0.5pp.
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