Australia’s Inflation Rate Slowed Down in Q1

The consumer prices have weakened in the previous quarter as core inflation lower than the central bank target for three consecutive years. This puts the forecast for a rate hike still far from achieving.

The Aussie dollar reached a four-month low following the increase of consumer price index (CPI) by 0.4 percent in the first quarter of the year. This did not reach the forecast increase of 0.5.

The annual CPI inflation came in at 1.9 percent but less than the presumed figure. The key rate of the underlying inflation averaged to 1.9 percent this year, which is favorable for the Reserve Bank of Australia as forecast.

The RBA still did not reach the long-term target of 2 to 3 percent for the core inflation in the period of nine consecutive quarters, which has been the longest recorded so far.

Wages growth is the main determining factor but slowed down to record lows despite a boost from the employment, which has been an unexpected occurrence for various developed nations.

Consequently, the central maintained their interest rates at a record low of 1.5 percent since the middle of 2016, which is unlikely to change in near-term.

The RBA Assistant Governor Christopher Kent said that there is no need to hasten the rate hike. Although, it is likely that the interest rate would be adjusted higher. At the same time, inflation and unemployment are anticipated to be gradual.

The interest rate futures gives a 30 percent probability to adjust in December to 1.75 percent but not fully priced until June next year.

Kent mentioned during the housing conference contradicting the media speculation regarding the A$480 billion in interest-only mortgages due in the next few years, similar to the sub-prime crisis in the United States.