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.


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell