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Australia inflation gauge stays tame in Oct: TDMI

[SYDNEY] A private-sector gauge of Australian inflation showed price pressures stayed muted in October, echoing a surprisingly soft outcome from official figures and underlining the scope available for cuts in interest rates.

Monday's survey from TD Securities and the Melbourne Institute showed consumer prices were unchanged in October, from September when they rose 0.3 per cent.

The annual pace ticked down to 1.8 per cent, from 1.9 per cent, still below the Reserve Bank of Australia's (RBA) target band of 2 to 3 per cent.

Government data out last week showed underlying inflation slowed to around 2.15 per cent in the third quarter, less than what analysts and the RBA had expected.

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The benign report added to speculation the central bank might choose to cut rates at its Nov 3 policy meeting, though the vast majority of analysts in a Reuters poll doubted it would move so soon.

The RBA last cut the cash rate to a record low 2.0 per cent in May and has since sounded wary of easing further, in part for fear of inflating a debt-driven bubble in property prices. "We see the RBA as reluctant cutters, questioning the firepower of even lower borrowing rates," said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities. "So even if the Board sees a lower inflation outlook, we do not see that as a trigger for a cut just now, but allows for such a move down the track if other sectors of the economy deteriorate." The TD-MI survey showed price rises for tobacco, newspaper, books and stationery and utilities added most to inflation in October. Those were offset by price falls in fruit and vegetables, holiday travel and accommodation and bread and cereal products.

Measures of core inflation were also subdued. The trimmed mean measure of the CPI was flat in the month, nudging the annual rate up to 1.7 per cent.

Inflation excluding fuel, fruit and vegetables rose 0.1 per cent in October, while the annual pace slowed a tick to 2.2 per cent.

Non-tradables inflation, covering the prices of goods and services not determined by international competition, picked up to 2.4 per cent, from 2.1 per cent. Yet, tradable inflation slowed to 0.9 per cent, from 1.7 per cent.


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