The headline consumer price index printed by the Australian Bureau of Statistics came in at 1.4% for the quarter, to be at 2% year on year.
But it's the core, or underlying rate which the RBA keeps an eye on, because that rate strips out one off volatile items which greatly influence the headline rate from quarter to quarter. That rate came in at 0.75% for the quarter and 2.5% year on year.
At 2.5%, it is in the very middle of the RBA's 2-3% target band.
The biggest factors contributing to the inflation spike include a 10% quarterly increase in fruit and vegetable prices because of weather-related effects.
That shouldn't be a surprise for regular supermarket shoppers. $5 for 6 tomatoes and $2.48 for one lime anyone?
Gas and electricity prices spiked 12% partly due to seasonal price rises along with the introduction of the carbon tax, which incidentally also contributed to a 5.8% jump in property rates and charges, in the quarter.
Economists at ANZ also note, that the 0.9% increase house purchase costs seems to be at odds with the subdued levels of housing market activity, and suggests it may have been affected by developers passing on the effects of the carbon tax.
Westpac points out, that one of the biggest surprises was the 4.5% increase in medical and hospital services which the ABS notes, rose mainly as a result of means-testing reforms of the Private Health Insurance rebate.
Despite those price rises, which directly impact our wallets, the chances of an interest rate cut in November have been reduced. The market is now pricing in a 60% chance of a rate cut.
Remember, the RBA's main mandate is to keep inflation at check.
The easiest way to explain this, is when the core rate of inflation is down towards 2%, the greater the chance of an official interest rate cut, all things remaining equal of course.
But at 2.5%, it is smack bang in the middle of the RBA's comfort level.
Don't forget though, the CPI result is backward looking, so the RBA will always be looking at forward looking indicators to make sure inflation is in check.
