Australia inflation gauge falls in May

[SYDNEY] A private-sector gauge of Australian consumer prices fell in May, indicating a lack of inflationary pressure that could keep the door open for another cut in interest rates.

The Melbourne Institute monthly inflation gauge fell 0.2 per cent in May, from April when it rose 0.1 per cent.

That slowed the annual inflation rate to one per cent, from 1.5 per cent, driving it further below the Reserve Bank of Australia's (RBA) 2 per cent to 3 per cent target band.

The trimmed mean measure also dipped 0.2 per cent, reversing a 0.2 per cent rise in April. In the twelve months to May, the trimmed mean increased by one per cent, down from 1.5 per cent.

"This month, the result was driven by falls in fruit and vegetable prices, as well as falls in non-durables and international holiday travel," said Sam Tsiaplias, senior research fellow at the Melbourne Institute.

"Looking at either the headline or trimmed mean measures, annual inflation appears to have fallen to about one per cent. Inflation excluding volatile items has also fallen to 1.5 per cent in annual terms. Whichever measure happens to be preferred, it is fairly clear that there is a sizeable gap between target and actual inflation."

The RBA holds its monthly policy review on Tuesday but is unlikely to deliver a back-to-back cut to the cash rate, which is already at a record low 1.75 per cent.

REUTERS