Aussies Slow Inflation Brings The RBA In Play

Australian consumer prices gained less than economists forecast last quarter on cheaper food and health care, pushing down the local dollar and giving the central bank scope to reduce interest rates.

The trimmed mean gauge of core prices rose 0.6 percent from the prior quarter, the Bureau of Statistics said in Sydney today, compared with the median forecast of 26 economists for a 0.7 percent gain. The broader consumer price index advanced 0.2 percent from three months earlier, half the forecast increase.

The data contrast with quicker consumer-price growth in Singapore last month, while the Bank of Japan tries to bolster its economy with a 2 percent CPI target. In Australia, moderating prices validate Reserve Bank Governor Glenn Stevens’s decision to cut rates 1.75 percentage points since Nov. 1, 2011, and revive non-mining areas of the economy.

“Today’s figures tell us we saw a slowdown in the Australia’s economy in the second half of the year,” said Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney and a former RBA official who forecast a trimmed mean CPI rise of 0.6 percent. “We’re seeing signs globally that there’s a turnaround and we’re seeing early signs that monetary policy is lifting the Australian economy.”

The so-called Aussie weakened, buying $1.0538 at 4:49 p.m. in Sydney compared with $1.0559 immediately before the report. The yield on 10-year government debt fell to 3.29 percent from 3.36 percent yesterday. Investors see a 48 percent chance the RBA will reduce the benchmark rate at its Feb. 5 meeting, interest-rate swaps data compiled by Bloomberg show.

Bloomberg

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