Fuel price pumps up inflation
INFLATION has risen on the back of surging petrol prices, but economists don’t believe the rise is strong enough to sway the Reserve Bank on another interest rate cut.
The Consumer Price Index, the key measure of inflation, lifted 0.7 per cent in the June quarter, official data out yesterday showed.
That took inflation to 1.5 per cent in the year to June, weaker than economists’ expectations of a 1.7 per cent rise and well below the RBA’s 2- 3 per cent target band.
Underlying inflation, which strips out the effects of volatile price movements, rose an average of 0.55 per cent in the June quarter for an annual rate of 2.3 per cent.
The results were unlikely to prevent the Reserve Bank from cutting rates from their historic lows of 2 per cent if needed, economists said.
“It shouldn’t force the RBA’s hand either way,” St George senior economist Jo Horton said.
“At this stage we’re expecting the RBA to leave rates on hold for an extended period.”
Ms Horton said petrol prices were a big factor in the result, rising 12 per cent from the first quarter of 2015.
Westpac chief economist Bill Evans was surprised by the soft result for food, which rose just 0.1 per cent in the quarter.
“The downward surprise on food was behind the softer headline print, but core was on our expectations,” Mr Evans said.
An economist from CommSec, Savanth Sebastian, said the inflation data would probably not prompt any rate move by the RBA.
BIGGER TAKE: Ashleigh McLean is concerned about rising petrol prices.