CPI stayed subdued in Sept qtr: survey

The annual rate of inflation is forecast to be a very low 1.8 per cent in the September quarter, but it is unlikely to prompt a cash rate cut.

Inflation is expected to be below the Reserve Bank of Australia's two to three per cent target range, but likely won't prompt an interest rate cut.

The consumer price index (CPI), the key measure of inflation, is forecast to have risen by 0.8 per cent in the three months to September, for an annual rate of 1.8 per cent, an AAP survey of 11 economists shows.

This follows low June quarter CPI, of 0.4 per cent, and its annual rate of 2.4 per cent.

The Australian Bureau of Statistics will release the inflation figures on Wednesday.

JP Morgan Australia chief economist Stephen Walters said a high exchange rate and below average economic growth is keeping inflation low despite higher petrol prices giving the headline CPI a bit of a boost.

"Fundamentally, there are few forces that would argue for a rapid acceleration in consumer prices," he said.

"GDP (gross domestic product) growth has been tracking below trend for around a year, and this should continue well into 2014.

"Only a weaker currency will add any sort of inflation impulse, although it probably is too soon to see this in the data."

The low inflation rate is unlikely to give the RBA scope to further reduce its cash rate this year, or at all.

In the past three year, the central bank has cut the rate to a record low of 2.5 per cent, in instalments from 4.75 per cent in November 2011.

In the past weeks, improving business and consumer confidence has caused some economists to push out their forecast for the next rate cut to next year, although most now say the RBA's rate cutting has ended.

National Australia Bank has pushed out its forecast for a cut from November to February which, it says, will be the last.

"It's hard to see the RBA cutting rates given improving confidence and house price gains," Senior economist David de Garis said.

"Unless data turns this thesis on its head in coming weeks, November and December are shaping up as on-hold months."

However, CommSec chief economist Craig James said interest rate expectations could change if inflation gets too low.

"If the annual underlying rate of inflation is much lower than this - that is, well into the lower end of the Reserve Bank's two to three per cent target band - then speculation of rate cuts will resurface," he said.

"But the headline rate of inflation in the September quarter should be a little higher than normal, reflecting higher petrol prices and increases in fares, rates and charges from July 1."

The median forecast for underlying inflation, which excludes volatile price movements, is 0.6 per cent in the September quarter and 2.2 per cent over the year to September.


Share

3 min read

Published

Updated

Source: AAP


Share this with family and friends


Get SBS News daily and direct to your Inbox

Sign up now for the latest news from Australia and around the world direct to your inbox.

By subscribing, you agree to SBS’s terms of service and privacy policy including receiving email updates from SBS.

Download our apps
SBS News
SBS Audio
SBS On Demand

Listen to our podcasts
An overview of the day's top stories from SBS News
Interviews and feature reports from SBS News
Your daily ten minute finance and business news wrap with SBS Finance Editor Ricardo Gonçalves.
A daily five minute news wrap for English learners and people with disability
Get the latest with our News podcasts on your favourite podcast apps.

Watch on SBS
SBS World News

SBS World News

Take a global view with Australia's most comprehensive world news service
Watch the latest news videos from Australia and across the world