Benign inflation to spark more rate cuts

24 Oct 2012, 7:52 am   -   Source: AAP

Australia's inflation is expected to remain subdued in the September quarter and it would mean there will be more interest rate cuts on the way.

Inflation in September quarter is expected to be below the central bank's two to three per cent target band and could prompt a Melbourne Cup day interest rate cut.

The Australian Bureau of Statistics (ABS) is due to release the consumer price index (CPI) for the quarter at 1130 AEDT on Wednesday.

The CPI is expected to rise by 1.1 per cent in the three months to September 30 for an annual rate of 1.7 per cent, according to an AAP survey of 15 economists.

For underlying inflation, which excludes volatile price movements, the median forecast was 0.6 per cent for the quarter and 2.2 per cent over the year.

CommSec chief economist Craig James said discounting by retailers was a factor in keeping a lid on consumer prices.

"Overall, the underlying rate remains under control because consumers remain cautious because they shop around and that's putting downward pressure on prices and margins," he said.

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