Australia inflation gauge picks up modestly in October: TDMI

[SYDNEY] A private gauge of Australian price pressures picked up slightly last month particularly in the tradable sector, suggesting a recent depreciation in the local currency may have put a floor on overall inflation.

The TD Securities-Melbourne Institute's monthly measure of consumer prices edged up 0.2 per cent in October, following a 0.1 per cent rise in September.

The annual pace of inflation quickened to 2.3 per cent from 2.2 per cent, but was still near the floor of the Reserve Bank of Australia's (RBA) long term target band of 2-3 per cent.

Notably, prices for tradable goods and services sped up to an annual pace of 2.2 per cent, up from 1.7 per cent and 1.9 per cent in the past two months.

This could be "a sign of things to come with the sustained depreciation of the exchange rate from the peak of US$0.95 in early July," said Annette Beacher, head of Asia-Pacific Research at TD Securities.

The Australian dollar fell more than 6 per cent against the greenback in September and last traded at US$0.8750.

Still, Monday's survey showed various measures of underlying inflation remained benign.

The trimmed mean rose 0.1 per cent in October, following a 0.1 per cent rise in September. The annual pace sped up to 2.5 per cent from 2.3 per cent, but was still well down from April's 3.1 per cent.

Inflation excluding fuel, fruit and vegetables increased by 0.1 per cent in the month, and ran at just 2.0 per cent for the year.

The slowdown in prices for the non-tradables sector continued into October with annual inflation now at 2.4 per cent, well off a high of 3.4 per cent earlier in the year.

This should give the Reserve Bank of Australia (RBA) plenty of room to leave interest rates unchanged at a record low 2.5 per cent, where they have been since it last cut in August 2013.

The RBA holds its policy review on Tuesday and is considered certain to keep rates steady.

REUTERS