A private gauge of Australian inflation was unchanged in August, a welcome moderation after a seasonal spike the previous month, while the annual pace stayed below policy makers' target.
The TD Securities-Melbourne Institute monthly inflation gauge was flat in August after a 0.9 per cent jump in July. The annual pace of inflation slowed to 1.7 per cent, from 1.9 per cent in July, to stay below the Reserve Bank of Australia's (RBA) long-term target of 2 to 3 per cent.
The central bank holds its monthly policy meeting tomorrow and is widely expected to keep rates at a record low of 3.0 per cent. However, analysts also suspect it will sound more hawkish on the outlook for rates given unexpected strength in recent data, and particularly business investment.
Annette Beacher, a senior strategist at TD Securities, argued that the moderation in inflation gave the RBA room to keep rates on hold for longer if it so wished.
"As global conditions remain uncertain and volatile, the RBA has plenty of scope to 'wait, watch and worry', voicing a neutral bias to rates at least for the next few months," she argued.
"It can assess the upcoming data flow to see whether it confirms or denies the current expectation that the worst is over in terms of the Australian downturn."
Central bank officials have sounded increasingly upbeat about the economic outlook in recent weeks and Governor Glenn Stevens has noted that the emergency setting of 3.0 per cent would not be needed for ever.
Contributing most to the monthly inflation gauge in August were price falls for holiday, travel, and accommodation; audio, visual and computing, and financial services.
These were offset by rises in prices for private motoring, alcoholic drinks, and fruit and vegetables. The price of automotive fuel rose by around 3.5 per cent in August, but is approximately 15 per cent below its level a year ago.
The price of dwelling rent fell by 0.5 per cent in August, and is just over 5 per cent below its peak of February.
The TD-MI measure of core inflation, which excludes volatile items like petrol and fruit and vegetables, fell 0.2 per cent in August, to correct some of July's 1.0 per cent jump.
That pulled the annual pace down to 2.6 per cent, from 3.0 per cent in July.
The trimmed mean measure, which strips out the biggest price rises and falls, edged up 0.1 per cent in August, after a 0.7 per cent rise in July. The annual pace dropped to 2.0 per cent, from 2.9 per cent the previous month.
Overall, prices rose in 28 CPI expenditure groups in August, while falling in 15.
Based on the data, the Melbourne Institute estimated that the official consumer price index would rise 1.3 per cent in the third quarter. That would see the annual pace of CPI inflation inch up to 1.6 per cent, from 1.5 per cent in the second quarter.
Reuters
