Australia inflation gauge flat in March, annual pace slows

[SYDNEY] A private-sector gauge of Australian consumer prices was unchanged in March, from February, while the annual pace of inflation slowed to a seven-month low in a sign there was plenty of scope to cut interest rates if necessary.

The benign underlying trend should reassure the Reserve Bank of Australia (RBA) that it can keep policy loose when it holds its monthly board meeting on Tuesday.

The central bank is widely expected to keep the cash rate at a record low 2 per cent and signal there is scope to ease further if needed.

Monday's survey from the Melbourne Institute showed consumer prices were flat in March, after falling 0.2 per cent in February.

The annual pace slowed to 1.7 per cent, from 2.1 per cent, taking it back below the RBA's long term target band of 2 to 3 per cent. A measure of underlying inflation pressure, the trimmed mean, also slowed to 1.6 per cent from 1.7 per cent.

The inflation gauge was up by a little under 0.4 per cent for the March quarter as a whole.

The official consumer price index for the first quarter is due later this month and a very low reading for underlying inflation could add to the case for a rate cut at the central bank's May meeting.

Contributing to the overall change in March were price falls for fruit and vegetables, and audio, visual and computing equipment. These were primarily offset by increases in tobacco and holiday travel and accommodation.

Costs for tradable goods and services fell 0.2 per cent in March, a second straight month of declines that dragged the annual pace down sharply to 1.9 per cent.

Non-tradable prices, those not determined by international competition, were flat in the month and up 1.5 per cent for the year.

Inflation excluding fuel, fruit and vegetables were also flat in the month though the annual pace picked up a touch to 2.3 per cent.

REUTERS