Inflation comes in higher than expected, puts pressure on rates | Australia

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Inflation comes in hher than expected, puts essure on rates

发布时间 23 January 2014, 13:15 AEST
Michael Janda

Inflation has risen more than economists expected, diminishing the ospect of further interest rate cuts.

Supermarket fruit and veg A recent ivate sector survey showed steep rises in fruit and vegetable ices. (Credit: ABC) 

The Bureau of Statistics Consumer ice Index (CPI) for the December quarter rose 0.8 per cent, ahead of economist forecasts which centred on 0.5 per cent.

That followed a 1.2 per cent rise in the September quarter and took the annual rate of inflation to 2.7 per cent, above the mid-point of the Reserve Bank's 2-3 per cent target band.

The trimmed mean and wehted median CPI fures – which are eferred by the because they exclude the most volatile ice movements – also came in well above forecasts, rising 0.9 per cent for the December quarter and 2.6 per cent for the year.

The ABS says the most snificant ice rises for the quarter were a 6.9 per cent rise in domestic travel and accommodation, an 8.1 per cent jump for fruit, a 7.1 per cent rise in vegetables, a 1 per cent rise in new home purchase ices, a 2.6 per cent increase in the cost of international travel and accommodation and a 2.2 per cent lift in tobacco ices.

The bureau says seasonal factors accounted for most of the rise in both domestic and international travel, with peak season ices for accommodation and airfares coming into effect.

It does substantially reduce the chances of another rate cut.

Shane Oliver, AMP Capital Mets

It says fruit and vegetable ices have been driven hher mainly by a series of adverse weather events and difflt growing conditions in key areas.

Tobacco ices mainly rose due to a Federal excise tax increase on December 1, and from the flow on effect of an indexed excise rise in August.

The only snificant ice fall listed by the ABS was a 1.1 per cent slide in the cost of automotive fuel – a ice decline that has quickly reversed in the new year.

The Australian dollar rose more than half a cent on the data, to reach 88.5 US cents from a level of 88.9 just before the release, as investors cut bets on the chance of further Reserve Bank interest rate cuts.

AMP Capital Mets head of investment strategy Shane Oliver says the fures would obably have raised some eyebrows at the Reserve Bank.

"Given the volatility you can see in the quarter-to-quarter inflation numbers in Australia, I don't think it would be enough to shock the Reserve Bank to hike," he told Reuters.

"But it does substantially reduce the chances of another rate cut."

economist Savanth Sebastian goes even further and says another interest rate cut is now off the table.

"The latest data closes the door on any further rate cuts. Financial mets see just a 3 per cent chance of a rate cut in February," he wrote in a note on the data.

"In turn, it is still too early to discuss rate hikes partlarly given the sluggishness of the labour met. It seems the path of least regret is [for the ] to rin on the interest rate sidelines while talking down rates."

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