The Australian dollar fell half a US cent following softer than expected inflation figures.

Australia’s consumer price index (CPI) rose 0.6 per cent in the March quarter, for an annual rate of 2.9 per cent, according to the Australian Bureau of Statistics.

The headline CPI was softer than expected easing speculation an interest rate rise could be on the table later this year.

Economists had been forecasting a rise of 0.8 per cent in the March quarter for an annual rate of 3.2 per cent.

The headline inflation was at 0.8 per cent and 2.7 per cent for the fourth quarter of last year.

At 1135 the Australian dollar was 93.22 US cents, down from to 93.75 US cents before the data was released.

The lower than expected figure would allow the RBA to keep the cash rate low, said ANZ chief economist Ivan Colhoun.

“It was a good result and the RBA will welcome the low reading after the very high fourth quarter read,” Mr Colhoun said.

“I think this will allow the RBA board to continue this very accommodative setting of monetary policy that it currently has for some time further.

“It’s consistent with the economy recovering slowly but not dramatically at this point in time.”

The cost of education, petrol and cigarettes (due to a scheduled rise in tobacco excise) increase but were partly offset by falls in the cost of domestic and international holidays, motor vehicle repairs and furniture.

A high headline inflation figure had been unlikely to concern the Reserve Bank.

“For a central bank that has historically been quite hawkish and consistently talked up the inflation risks to the economy, the RBA’s forecasts suggest few inflation fears,” National Australia Bank senior economist Spiros Papadopoulos said.

The increase in the first three months of 2014 had already been forecast in the Reserve Bank’s Statement of Monetary Policy in February after a surprise rise in the fourth quarter of last year.

The central bank has suggested rates are likely to remain on hold until the jobs market improves.

– with AAP