New benign inflation data suggests the Reserve Bank of Australia (RBA) can wait for some time before raising the cash rate from its current 49-year low, an economist says.
The TD Securities-Melbourne Institute monthly inflation gauge released on Monday was unchanged in August after rising 0.9 per cent in July.
The annual rate of the gauge was 1.7 per cent, the fourth consecutive month the inflation rate has been below the RBA’s two to three per cent inflation target.
The central bank holds its monthly board meeting on Tuesday.
Economists widely expect the cash rate to be left unchanged at 3.0 per cent, although some expect it to hint that an increase is not far away given the strength of recent economic data.
However, TD Securities senior economist Annette Beacher says the inflation report suggests a rise in interest rates is “still some way off”.
“As global conditions remain uncertain and volatile, the RBA has plenty of scope to `wait, watch and worry’, voicing a neutral bias to rates at least for the next few months,” Ms Beacher said releasing the data.
“Like those in the financial markets, it can assess the upcoming data flow to see whether it confirms or denies the current expectation that the worst is over in terms of the Australian downturn.”
In August, the inflation gauge showed there were price falls for holiday, travel, and accommodation; audio, visual and computing; and financial services.
These were offset by rises in prices for private motoring, alcoholic drinks, and fruit and vegetables.