Australia’s Inflation Grows Faster Than Expected

Australia’s core consumer prices gained more than economists forecast last quarter, affirming policy makers’ decision to adopt a neutral interest-rate stance.  The trimmed mean gauge of core prices rose 0.8 percent from the previous quarter, the Bureau of Statistics said in Sydney today, compared with the median forecast of 25 economists for a 0.6 percent gain. The consumer price index advanced 0.5 percent from the previous three months, matching economists’ estimates.

The currency rose as investors bet Reserve Bank of Australia Governor Glenn Stevens is unlikely to cut the record-low 2.5 percent benchmark rate in the months ahead. The central bank has lowered borrowing costs by 2.25 percentage points since late 2011 as the local dollar’s strength dragged on growth and a mining investment boom crested.

“Softer domestic demand hasn’t flowed through to lower price growth as much as expected,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before the report. “The data doesn’t change the RBA’s stance that rates will be on hold through 2014. We do not expect rate normalization to begin until the first quarter of 2015, at the earliest.”

Bloomberg

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