Inflation Remains Low

Australian inflation increased a little above market expectations in the December quarter despite the sharp falls in petrol prices.

The annualised rate rose to 1.7%, but still sits below the RBA’s target band of 2–3% p.a.

Headline CPI rose 0.4% quarter on quarter to 1.7% p.a. in the December quarter up from 1.5% for the previous three-month period. The corresponding underlying measure of inflation averaged 2% year on year.

While the December quarter rise in consumer prices was the highest recorded since the fourth quarter of 2014, inflation data continues to indicate that the business pricing power and inflationary pressures generally remain weak. This leaves the RBA with the flexibility to cut interest rates again if necessary.

Source: ABS, AMP Capital