Australian Q1 Inflation Surprisingly Cold, A Eases

0
36

SYDNEY, April 28 (Reuters) – Australian consumer prices rose by much less than expected in the first quarter partly due to government subsidies for home building, while a very tame reading for core inflation suggested monetary policy would stay super loose for a long time to come.

The consumer price index rose 0.6% in the March quarter from the prior three-month period, under market forecasts of a 0.9% gain. The annual pace picked up to 1.1%, from 0.9%, but again missed forecasts of 1.4%.


That also remained far below the Reserve Bank of Australia’s (RBA) target band of 2-3%.


A key measure of trimmed mean inflation rose a surprisingly low 0.3% in the quarter, while the annual pace, at 1.1%, was the weakest on record.


The soft result reinforced views the Reserve Bank of Australia (RBA) will keep interest rates at a record low 0.1% for a long time to come and even extend its bond-buying programme later in the year.


The Australian dollar fell to a day’s low of $0.7726 following the soft result. It was last at $0.7737.


The RBA has reiterated rates will remain at 0.1% until actual inflation jumps to back within its 2-3% target band. Prices have been running below the floor of that band for five full years and are projected to keep missing until at least 2023.


The ABS said March quarter inflation was weak due to the “introduction, continuation and conclusion” of a number of government schemes and grants, resulting in price falls for new dwellings and tertiary education.


“Without the offset from these grants, the price of new dwellings would have risen, reflecting increases in materials and labour prices in response to strong demand,” said Michelle Marquardt, Head of Prices Statistics at the ABS.


Price rises in tobacco and furnishings were partially offset by falls in rents, automotive fuel and utilities, the ABS data showed.


(Reporting by Wayne Cole and Swati Pandey Editing by Shri Navaratnam and Sam Holmes)


Source: Reuters

LEAVE A REPLY

Please enter your comment!
Please enter your name here