From TD Securities and the Melbourne Institute this morning:
The TD Securities – Melbourne Institute Monthly Inflation Gauge rose by 0.1 per cent in February, following a 0.2 per cent increase in January and a 0.5 per cent increase in December. In the twelve months to February the Inflation Gauge increased by 2.0 per cent, following a 2.2 per cent rise for the twelve months to January, to be the lowest annual rate in two years.
Contributing to the overall change in February were price rises for fruit and vegetables, alcohol and tobacco, and automotive fuel. These were offset by a sharp seasonal fall in holiday travel and accommodation, as well as price falls for furniture and furnishings, and insurance and financial services. The price of fruit and vegetables rose by 1.8 per cent in February, while fuel prices rose by 0.5 per cent in the month.
The trimmed mean of the Inflation Gauge rose by 0.1 per cent in February, following a rise of 0.3 per cent in January. In the twelve months to February, the trimmed mean increased by 2.1 per cent, following a 2.2 per cent rise for the twelve months to January, to be once again at the bottom of the RBA’s two to three per cent target band.
According to Annette Beacher, Head of Asia-Pacific Research at TD Securities, “For the March quarter, using mid-quarter prices now available, our headline inflation measure rose 0.7 per cent, lead by non-tradable inflation, while our trimmed mean measure also rose 0.7 per cent. While they appear to be relatively high outcomes, the March quarter is a seasonally strong one for many non-tradable prices. We will publish our forecasts for the official March quarter CPI with the next March Inflation Gauge report, but the signal from our Inflation Gauge is that prices may not have significantly cooled in the quarter, but given that March is a seasonally strong quarter, our annual inflation rate forecasts remain at the bottom of the RBA’s two to three percent target range.”
“For the RBA Board meeting tomorrow, members will note that there has been next to no evidence of a “material softening of domestic demand” in the last four weeks, the Bank’s clearly stated hurdle for further easing. There has been upside surprises to employment, housing finance and exports in particular. In contrast, fourth GDP is looking close to flat, but we also have confirmation that an outsized resource-led private investment boom remains on track well into next year also. The easiest decision is to leave the cash rate at neutral for another month, and indeed it is increasingly likely to remain the case for several months to come, added Ms Beacher.”