💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

Australia inflation at 17-yr low, opens door to rate cut

Published 27/07/2016, 12:18 pm
© Reuters.  Australia inflation at 17-yr low, opens door to rate cut

By Wayne Cole

SYDNEY, July 27 (Reuters) - Australian consumer prices rose at the slowest annual pace since 1999 last quarter while core inflation stayed at a record trough, leaving the door open to a cut in interest rates as early as next week.

The headline CPI index rose just 1.0 percent in the year to June, while key measures of underlying inflation held at 1.5 percent, all well below the Reserve Bank of Australia's (RBA) target band of 2 to 3 percent.

The central bank had already cut rates to an all-time low of 1.75 percent in May following an alarmingly weak inflation report for the first quarter. Many analysts now looked for a repeat performance at the RBA's next meeting on Aug. 2.

"We think that this print is low enough to see the RBA provide a bit more support to the economy," said Tom Kennedy, an economist at JPMorgan (NYSE:JPM).

"For us, this is definitely consistent with the idea that the cash rate needs to go lower."

Investors were a little less sure and slightly lengthened the odds of a cut next week to 50 percent 0#YIB: , from 60 percent ahead of the data. A move is still fully priced in by November.

Yields on three-year government paper AU3YT=RR stood at 1.56 percent, well under the overnight rate, while the local dollar AUD=D4 was little changed at $0.7515.

The Australian Bureau of Statistics reported its headline consumer price index (CPI) rose 0.4 percent last quarter, from the fist quarter when it fell 0.2 percent.

The biggest price gains came for healthcare, petrol, tobacco and new home purchases. That was balanced by falls in domestic holiday travel and accommodation, motor vehicles and telecoms.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.