Inflation gauge throws spanner into RBA machinery

Most economists and financial markets believe the Reserve Bank of Australia (RBA) is likely to lift the official cash rate by 0.25% at Tuesday’s meeting.

However, the Melbourne Institute headline monthly inflation gauge was released on Monday, which fell by 0.1% in October:

It was the first month of falling prices in 14 months.

The annual growth rate also eased to 5.1% from 5.7% in September:

The below chart from Alex Joiner shows that underlying inflation has fallen sharply:

Source: Alex Joiner

If the RBA was on the fence about whether to hike, this data could stay its hand.

We will find out 2.30 pm on Tuesday.