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Australia's core consumer prices increase faster than forecast
[SYDNEY] Australia's core consumer prices gained more than economists forecast last quarter, suggesting the central bank may not need to rush to cut interest rates.
The Reserve Bank of Australia looks at two core inflation measures - trimmed mean and weighted median - and targets an annual rate of between 2 per cent and 3 per cent on average.
Wednesday's report showed that trimmed mean CPI rose 1.7 per cent from a year ago vs median forecast of 1.5 per cent gain; weighted median CPI climbed 1.3 per cent vs forecast 1.3 per cent increase. Headline CPI rose 1 per cent vs forecast 1. 1 per cent rise.
Governor Glenn Stevens cut rates almost three months ago following the last inflation report, and has since stood pat at 1.75 per cent.
The RBA is weighing solid local growth and job gains against record-low wage increases and weak inflation. Unexpectedly adding to the picture has been a rebound in commodity prices, including iron ore, while the currency has been volatile amid election uncertainty and the Brexit fallout.
The Australian dollar initially rose following the data, but was little changed at 75.21 US cents at 11:38 am in Sydney.
The report also showed quarterly inflation of 0.6 per cent for tradable goods, which are affected by the currency and other international factors, and 0.4 per cent for non-tradables, which are impacted by domestic variables.
It showed the following key headline price gains and losses: Medical and hospital services rose 4.2 per cent quarter-on-quarter. Automotive fuel costs gained 5.9 per cent. Domestic holiday travel and accommodation decreased 3.7 per cent.
The central bank is relying on growth-drivers from service industries like tourism and education as mining investment winds down. Australia's unemployment rate has remained below 6 per cent for most of 2016 and the economy recorded its best growth spurt in four years in the first quarter. The RBA attributes some of the stronger labor market outcomes to the very low wage gains.
The statistics bureau also released quarterly numbers for inflation: Trimmed mean CPI rose 0.5 per cent q-o-q vs the median forecast of 0.4 per cent. Weighted median CPI gained 0.4 per cent q-o-q vs the median forecast of 0.4 per cent, and CPI increased 0.4 per cent vs median forecast 0.4 per cent