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Australia's annual core inflation nears central bank's target
[SYDNEY] Australia's annual core inflation accelerated last quarter to just below the lower end of the central bank's target, underscoring its decision to leave interest rates unchanged.
- Quarterly trimmed mean gauge rose 0.5 per cent vs economists' estimate of 0.5 per cent
- Annual trimmed mean advanced 1.9 per cent vs forecast 1.8 per cent (RBA aims for 2 per cent to 3 per cent range)
- Quarterly headline CPI rose 0.5 per cent vs estimated 0.6 per cent; annual CPI gained 2.1 per cent vs forecast 2.2 per cent
- Aussie dollar bought 75.28 US cents at 11:33am from 75.40 cents prior to report
Reserve Bank of Australia governor Philip Lowe has signalled a willingness to tolerate weaker inflation, warning a rapid return to target implies interest-rate cuts that could further inflame east coast house prices. The governor said in minutes of this month's policy meeting that the property and labor markets "warranted careful monitoring" - a departure for an inflation-targeting central bank.
Australia's jobs market has remained subdued since the start of last year - aside from a full-time hiring bonanza in March that many economists are skeptical about - as unemployment lifted to 5.9 per cent and underemployment remains high. That suggests plenty of slack and little likelihood of wage increases and faster inflation.
More positively, an unusual pattern of synchronised growth among major economies is likely to aid Australia in time, particularly if much-vaunted global reflation takes hold too. But for now, Australia's core inflation - which smooths sharp rises and falls and is the RBA's preferred measure - is likely to languish below target.