Australia’s quarterly Consumer Price Index (CPI), a major inflation indicator, has a consensus forecast of +0.4% for the second quarter of this year.
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He said the inflation data was not low enough to make an August rate cut a certainty, but he believed there was a strong chance.
Underlying measures of inflation – which smooth out volatile price swings – while equally benign, were a fraction higher than economists predicted and caused financial markets to row back on their interest rate cut expectations.
Record low wages growth, slowing growth in rents and strong discounting in major supermarkets have contributed significantly to weak inflation, despite Australia’s better than expected gross domestic product growth of 3.1% and its lower-than-expected unemployment rate of 5.7%.
Bolstering the evidence for a cut is that the ASX All Ords fell from about 5625 points at 11am to 5607 points at 12pm on Wednesday.
This takes annual inflation to just 1 per cent, the weakest annual rise since 1999.
The RBA’s weighted median picked up 0.4 percent on quarter – matching forecasts and up from 0.1 percent in Q1.
The wholesale inflation accelerated for the third straight month in June hitting 1.62 per cent on costlier food and manufactured items.
The RBA’s trimmed mean CPI rate rose 0.5% on the quarter following a 0.2% gain in the January-March period.
Wednesday’s Australian Bureau of Statistics report showed the CPI rose 0.4 per cent in the quarter as falling holiday and auto prices offset a rise in petrol prices. Any such rate cut, however, would largely be dependent upon the impending CPI inflation reading.
“Both are beyond the ability of the RBA to deliver, they remain the policy maker of last resort”.
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New data from the Bureau of Statistics shows headline annual inflation is now growing at just 1%.
