TD-MI Inflation falls in November

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The TD Securities – Melbourne Institute Monthly Inflation Gauge fell by 0.1 per cent in November, following a
0.1 per cent rise in both October and September. In the twelve months to November, the Inflation Gauge rose by
2.1 per cent, following a 2.6 per cent rise for the twelve months to October.

Stephen Koukoulas, co-creator of the private inflation gauge, and former adviser to the PM, contends this may mean a negative CPI print for the December quarter:

Monthly average rises of 0.2% are consistent with inflation running at 2.5% – the middle of the RBA target band. Monthly averages of 0.1% or less obviously show inflation below the bottom of the RBA target band which is where we are heading at the moment.

With more than five-sixths of the December quarter data available in the results of the Inflation Gauge, it now looks likely that the official CPI (due for release on 25 January) will be negative – perhaps down 0.2% – to confirm a massive disinflation pressure coming from the softer economic performance through 2011 driven by tight monetary and fiscal policies….

The inflation momentum suggests the risks are building that the RBA will miss its inflation target – on the down side – during the course of 2012. Aggressive interest rate cuts remain on the cards.

TD-MI PR Nov11 – pr

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