- Su-Lin Ong, a senior economist at RBC Capital Markets
Australian consumer prices climbed at a weaker pace than expected in the third quarter, opening door to interest rate cut and sending the Aussie Dollar steeply lower. Australia's consumer price index edged up 0.5%, the Australian Bureau of Statistics reported, down from 0.7% in the June quarter. Measured on an annual basis, costs of living in Australia held steady at 1.5%, below market's consensus of 1.7%. At the same time, the nation's underlying inflation rose by just 0.3% in the three months through September, the smallest gain since 2011 and missing market forecasts of 0.5%. The annual core inflation rate slowed to around 2.15%, compared with 2.3% in the second quarter. The Australia Dollar dropped 0.77% versus the Greenback to $0.7133 after the data release from $0.7188.
Inflation has not been a major reason for a headache for the Reserve Bank of Australia over the last few years as the most gauges held firmly within the central bank's 2%-3% target band. The RBA's preferred measures of consumer prices, the trimmed mean and core CPI, have remained within the bank's target range for the last three years. The central bank's most recent economic forecasts suggest inflation to remain at a healthy level for the next two-an-a-half years.
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