Soft Australian inflation supports low interest rates 

Australian consumer prices rose 0.5 percent in the three months to September, official figures showed Wednesday, as the annual rate of inflation eased after the removal of a controversial carbon tax.

The increase in the consumer price index (CPI) in the third quarter was slightly stronger than economists’ estimates of 0.4 percent.
The new figures took the annual rate of inflation to 2.3 percent, the Australian Bureau of Statistics (ABS) said, down from 3.0 percent in the year to June. The year-on-year rate matched analysts’ projections.

The softer number keeps inflation within the Reserve Bank of Australia’s target range of 2.0 to 3.0 percent and gives the central bank room to maintain its record-low interest rate of 2.5 percent.

Underlying or core inflation, which strips out volatile items and is more closely watched by the Reserve Bank, came in at 0.5 percent for the third quarter for an annual rate of 2.55 percent.
The Australian dollar fell slightly before recovering to trade at 87.65 US cents.

Australia’s central bank has kept the cash rate at 2.5 percent since its last cut in August 2013 to stimulate the non-mining sectors of the economy amid an expected sharp fall-off in resources investment following an unprecedented boom.

The Australian data came amid fears over eurozone deflation, downgrades in global growth and falling commodity prices. But analysts said deflation was less of a concern in Australia, as the recent declines in the local currency could lift the prices of some imported goods.

“The risk would seem to be that inflation remains well contained from here, however, there are several factors working in the opposite direction,” HSBC’s chief economist for Australia Paul Bloxham said.

 

Source: brecorder- Soft Australian inflation supports low interest rates

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