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Australia headline inflation beats forecasts, rate hike still distant

[SYDNEY] Australian consumer prices beat expectations last quarter but core inflation ended another year below the central bank's target band, an outcome that cemented views interest rates will remain at record lows for a long while.

The local dollar jumped as the headline consumer price index (CPI) rose 0.5 per cent in the December quarter, surpassing forecasts for a 0.4 per cent increase.

Annual CPI inflation ran at 1.8 per cent, again beating estimates. Key measures of underlying inflation favoured by the Reserve Bank of Australia (RBA) averaged around 1.75 per cent for the year, in-line with forecast.

The biggest price increases in the quarter came from tobacco, food and recreation while clothing and footwear, health services and transport all fell.

Core inflation has now undershot the RBA's long-term target band of 2 per cent to 3 per cent for 12 straight quarters, the longest stretch since the series began.

REUTERS

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