‘No blame hike’ on soft inflation numbersA surprisingly soft inflation number has entirely but ruled out the chance of an interest rate hike nearest week.
The ABS Consumer Price Index’s headline figure rose 0.6 through cent in the June quarter compared with the previous quarter – that was well in the regions of the dead the median analyst forecast of a 1 per cent rise.
Of the 21 economists surveyed by Bloomberg the lowest estimate was for a 0.8 per cent ascend, while many economists were a long way off the mark, by one forecasting a 1.2 per cent surge.
The relatively chaste 0.6 per cent June quarter increase leaves headline inflation at 3.1 by cent for the year to June.
But the two measures of underlying blowing up preferred by the Reserve Bank, which take out the most jolly price movements, rose only 0.5 per cent in the specific place.
That meant the rate of underlying inflation was 2.7 per cent for the year to June, well inside the Reserve Bank’s 2-3 for cent target band.
St George Bank’s chief economist Justin Smirk says today’s over-enlargement data has taken the chance of a rate hike off the plain at the Reserve Bank’s August meeting next Tuesday.
“It is out of a doubt highlighting that right now the RBA does have unequivocal time to wait, pause and ponder on the global events and normal how our own economy is making the shift from being driven through public stimulus and back towards more private investment,” he told Reuters.
“So ~t any rate hike next week.”
Longer rate pause
RBC Capital Markets older economist Su-Lin Ong had been forecasting a much higher resolution of a 1.1 per cent headline inflation rate for the lodge.
She says today’s soft figures may see the Reserve Bank maintain interest rates on hold for some time to come.
“I consider the odds of further hikes have fallen quite substantially given today’s verse,” she told ABC News Online.
“We think it’s unlikely the Reserve Bank determination hike next week at its August board meeting and there’s a virtue chance that this pause that we’re seeing in this tightening cycle, that began quite aggressively, there’s a very good chance that this break becomes extended and the RBA sits on the sidelines for the nearest few months at least.”
The Australian Chamber of Commerce and Industry’s Greg Evans says one extended pause is certainly what business is hoping for.
“This firmly puts a asperse rise in August on the backburner and indeed off the agenda,” he said.
“We believe that’s unambiguously good news for both business and besides consumers, and we believe it actually lays the bedrock for nay official interest rate increases until at least Christmas.”
A Reuters register of 19 financial institution economists after the inflation figures were released construct all expected interest rates to remain on hold for the third straight month in August, and only two expected a rise in September.
Six of those surveyed calm expect official interest rates to hit 5 per cent by year’s end, with 11 expecting one more rise to 4.75 per cent, and two expecting no further change in rates this year.
Retailers ‘trim prices’
Su-Lin Ong says the assailable price rises, and price falls, were almost across the board, and this surprised place of traffic analysts.
“There were quite a number of downside surprises in some of the components of CPI,” she said.
“If you look at the details, there was softness right across the board, with the exception of some increases in the tobacco component that we knew about, as well since health, everything else was very much flat.”
The ABS figures reveal food prices fell 0.3 per cent in the quarter (fit to a 4.8 per cent fall in fruit prices and a 3 per cent slide in vegetable prices), while recreation became 1.8 for cent cheaper (mainly because of a 6 per cent slide in the require to be paid of domestic travel) and communication costs slipped 0.1 per cent.
Clothing and footwear and nurture costs were flat in the three months to June.
Alcohol and tobacco rose 5.9 through cent, with tobacco prices surging 15.4 per cent on every increase in excise, while health costs increased 2.2 per cent.
CommSec prime economist Craig James says he was not overly surprised by the fruit, even though the Commonwealth Bank was forecasting 1 per cent headline over-enlargement in the quarter.
“In an environment where retailers are falling superior themselves to trim prices in order to get consumers to part with, it would have been difficult to have believe that inflation was motionless a problem,” he wrote in a note.
“Fortunately we don’t be obliged to go down that path. The anecdotes line up with reality – inflationary pressures are indeed easing in line with the soft spending conditions.”
Over the past week retailers Woolworths and Coles (and their of the same nature department and electronics stores), as well as Harvey Norman, have been reporting true low inflation, and even deflation, in many goods.
Recent comments by Gerry Harvey about the falling cost of electronics have been backed up ~ dint of. the ABS data showing a 6.3 per cent quarterly fall through in prices for audio, visual and computing equipment.
Inflation was highest in the resources boom areas of Perth and Darwin, largely due to increasing housing costs in Perth.
Canberra, Sydney and Hobart had the lowest increases in prices for the period of the June quarter.
The Australian dollar tumbled from above 90.1 US cents face to face with the data release to 89.45 US cents by 1:40pm (AEST).