Australia inflation gauge stays benign in March: TDMI

[SYDNEY] A private-sector gauge of Australian inflation lifted off a five-year trough in March as petrol prices rebounded, but core inflation moderated further suggesting there was room for a further cut in interest rates as early as next week.

The TD Securities-Melbourne Institute's monthly measure of consumer prices rose 0.4 per cent in March, from February when it had been unchanged in the month.

The annual pace ticked up to 1.5 per cent, from 1.3 per cent, but stayed well below the floor of the Reserve Bank of Australia's (RBA) target band of 2 to 3 per cent.

The central bank holds its monthly policy meeting on April 7 and markets are wagering it will follow up a February easing with another quarter point cut to 2.0 per cent.

Interbank futures imply around a 60 per cent probability of a move next, and are fully priced for 2 per cent by May.

Importantly, the TDMI survey showed it was not just lower energy prices that were pulling down cost pressures with measures of underlying inflation also easing in March.

The trimmed mean was flat in the month, while the annual pace slowed to 1.6 per cent from 2.0 per cent in February. Inflation excluding fuel, fruit and vegetables fell 0.2 per cent in March and dragged the annual rate down to 1.9 per cent from 2.3 per cent.

Annette Beacher, chief Asia-Pac macro strategist at TD Securities, said the survey suggested the official consumer price index (CPI) rose just 0.1 per cent in the three months to March, for an annual pace of only 1.2 per cent.

Underlying inflation was seen running at a tame 2.2 per cent. The CPI report is due out on April 22.

For March alone, the TDMI gauge showed a sharp bounce in petrol prices following much bigger falls in previous months, while fruit and vegetables and tobacco also added to inflation.

Those were offset in part by falls in alcoholic beverages, rents and clothing.

REUTERS