A private measure shows inflation was weak last month, as prices rose for education, transport and utilities, but fell for clothing, holiday travel and books.
The TD Securities – Melbourne Institute Inflation Gauge rose by 0.1 per cent in January, after a surprise jump of 0.7 per cent the month before.
That puts the annual headline rate of inflation at 2.5 per cent, which is at the middle of the Reserve Bank’s target range.
However, the trimmed mean, preferred by the RBA because it removes the most volatile price movements, was unchanged at 2.7 per cent, in the top half of the target range.
TD Securities economist Annette Beacher says inflation is usually stronger in January due to seasonal factors, and last month’s price rises were driven solely by regular new year price increases for education, transport and utilities.
“Those three sectors were the biggest drivers upward of the gauge this month. So if you actually exclude those seasonal jumps we actually had a small fall in the CPI for the January report,” she said.
Ms Beacher expects the RBA to leave official interest rates on hold at 2.5 per cent for most of this year.
“I’m even more firmly of the view that the RBA’s done [cutting rates] for this cycle, however the global backdrop is not that certain,” she forecast.
“We are seeing emerging market volatility in the markets, so even though I do expect the next move to be up for the cash rate, I just can’t see that on a six-month horizon at this stage.”
Ms Beacher says one factor that will make further rate cuts unlikely is the expected rise in so-called ‘tradables’ inflation – that is the price of imported goods going up due to the falls in the Australian dollar.
“Tradeable inflation and the pass-through of the Aussie dollar will be certainly the focus for the RBA over the course of this year,” she added.