- Paul Dales, chief Australia and New Zealand economist at Capital Economics
Inflation in Australia cooled for the third consecutive quarter, giving the Reserve Bank of Australia the green light for further monetary policy easing. The consumer price index rose 0.2% in the three months through March resulting in an annual inflation rate of 1.3%, the slowest pace in almost three years, according to the Australia Bureau of Statistics. Economists had predicted cost of living to tick up by 0.1% on quarter and 1.3% from the previous year. Meanwhile, the central bank targets an inflation rate of between 2% and 3% annually. Core inflation, which strips out volatile items and is more closely watched by the RBA, climbed 0.6% in the first quarter from the previous three months period and took the year-on-year rate to 2.35%, matching economists' expectations. The softer inflation figures were caused by a 12.2% decline in fuel prices and a 8.0% drop in the fruit prices. Yet, the core inflation data boosted the Australian Dollar, which gained almost half a US cent to 77.60 US cents.
The Reserve Bank of Australia Governor Glenn Stevens kept the key interest rate unchanged in the past two months after slashing it to a record 2.25% in February. Policy makers said in minutes of the April's meeting released earlier in the week that they wanted to review inflation data to assess the economy's strength.
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