Australian inflation hits 0.5 pct in Q2

RBA to keep interest rates at record low

SYDNEY, July 23, (AFP): Australian inflation came in at 0.5 percent in the three months to June, official figures showed Wednesday, giving the country’s central bank room to keep interest rates at a record-low to support the economy.

The consumer price index (CPI) had lifted 0.6 percent in the previous quarter, the Australian Bureau of Statistics (ABS) said.

The latest figures took the annual rate of inflation to 3.0 percent, up from 2.9 percent in the year to March, but within the Reserve Bank of Australia’s target range of 2.0-3.0 percent.

The Australian dollar, which was trading at 93.93 US cents Tuesday, slipped briefly before surging to 94.35 US cents.

The ABS data was in line with market expectations of an increase of 0.5 percent quarter-on-quarter and 3.0 percent over the year.

“We view today’s outcome, and the inflation outlook more broadly, as neutral for monetary policy,” ANZ’s senior economist Riki Polygenis said.

“It does not appear weak enough to justify a rate cut. Equally, it implies little urgency for the RBA to wind back very expansionary monetary policy.”

The inflation levels were driven by a rise in health insurance, cigarette prices, new housing, furniture and international travel.

Moving in the opposition direction were petrol prices, domestic travel and telecommunication equipment and services costs.

Underlying or core inflation, which