Australia inflation gauge stays benign in June: gauge

[SYDNEY] A private-sector gauge of Australian inflation remained subdued in June and comfortably below official targets, offering scope for the central bank to lower interest rates again this year if needed.

The TD Securities-Melbourne Institute's monthly measure of consumer prices rose 0.1 per cent in June from May, when it increased by 0.3 percent. The annual pace ticked up to 1.5 per cent, still well under the Reserve Bank of Australia's (RBA) target band of 2 to 3 per cent.

The central bank holds a policy meeting on Tuesday and is thought almost certain to keep rates steady after having cut to an all-time low of 2.0 per cent in May.

Still, some investors suspect policy might need to be eased again, in part to offset weakness in business investment at home and economic uncertainty in China, Australia's biggest export market.

Interbank futures imply around an 86 per cent probability of a move by December. "We expect tomorrow's RBA Board meeting to pass without much excitement, with the statement to be a cut and paste of last month, keeping explicit forward guidance off the table," said Prashant Newnaha, a rates strategist at TD Securities.

"However as we expect weak data reports in the weeks and months ahead, the next move is more likely to be down than up."

Monday's TD-MI survey suggested inflation would be no hurdle to a move. The trimmed mean of the CPI edged up just 0.1 per cent in the month while the annual rate of 1.4 per cent was down from 2.4 per cent at the start of this year.

Inflation excluding fuel, fruit and vegetables slowed to a 1.3 per cent annual pace.

There has also been a marked moderation in non-tradable prices, those for goods and services not determined by international competition. That was a notable shift as home-grown inflation has been stubbornly high for some years.

The annual pace of non-tradable inflation stood at 2.0 per cent, compared to 2.5 per cent back in January.

For June alone, the biggest rises came in petrol, fruit and vegetables and new dwelling purchase by owner-occupiers. These were offset by price falls in holiday travel and accommodation, newspapers, books and stationery and furniture and furnishings.

REUTERS