Australia’s core consumer prices gained more than economists forecast last quarter, suggesting the central bank may not need to rush to cut interest rates.
The Reserve Bank of Australia looks at two core inflation measures -- trimmed mean and weighted median -- and targets an annual rate of between 2 percent and 3 percent on average. Wednesday’s report showed:
Trimmed mean CPI rose 1.7% from year ago vs. median forecast of 1.5% gain
Weighted median CPI climbed 1.3% vs. forecast 1.3% increase
Headline CPI rose 1% vs. forecast 1.1% rise
Governor Glenn Stevens cut rates almost three months ago following the last inflation report, and has since stood pat at 1.75 percent. The RBA is weighing solid local growth and job gains against record-low wage increases and weak inflation. Unexpectedly adding to the picture has been a rebound in commodity prices, including iron ore, while the currency has been volatile amid election uncertainty and the Brexit fallout.
The Australian dollar initially rose following the data, but was little changed at 75.21 U.S. cents at 11:38 a.m. in Sydney.
The report also showed quarterly inflation of 0.6 percent for tradable goods, which are affected by the currency and other international factors, and 0.4 percent for non-tradables, which are impacted by domestic variables.
It showed the following key headline price gains and losses:
Medical and hospital services rose 4.2% QoQ
Automotive fuel costs gained 5.9%
Domestic holiday travel and accommodation decreased 3.7%
The central bank is relying on growth-drivers from service industries like tourism and education as mining investment winds down. Australia’s unemployment rate has remained below 6 percent for most of 2016 and the economy recorded its best growth spurt in four years in the first quarter. The RBA attributes some of the stronger labor market outcomes to the very low wage gains.
The statistics bureau also released quarterly numbers for inflation:
Trimmed mean CPI rose 0.5% QoQ vs. median forecast of 0.4%
Weighted median CPI gained 0.4% QoQ vs. median forecast of 0.4%
CPI increased 0.4% vs. median forecast 0.4%