Finance Finance News Inflation stuck below RBA target

Inflation stuck below RBA target

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The annual rate of inflation is staying well below the Reserve Bank’s two to three per cent target, but the bank is unlikely to take the option of cutting the cash rate.

Consumer prices were up 0.1 per cent in November, after a flat result in October, according to the TD Securities/Melbourne Institute monthly inflation gauge.

The annual rate of inflation was 1.8 per cent in November, and has stayed below two per cent all year.

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Price rises for fruit and vegetables, as well as newspapers, books and stationery were more than offset by falls in the price of holiday accommodation and travel, rents, and the price of fuel.

TD Securities Asia Pacific chief macro strategist Annette Beacher expects the RBA to keep its cash rate unchanged for quite a while, despite inflation staying well below its target band.

“We are of the view that financial markets are not sufficiently pricing the risk that the RBA cuts in 2016, with the trigger being further downside disappointment in inflation,” she said.

Ms Beacher expects the December quarter annual inflation rate to be 1.5 per cent, when the official figures are released in late January 2016.

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