Australia inflation gauge slows sharply in December - TDMI
SYDNEY (Reuters) - A private gauge of Australian inflation braked to the slowest pace in two-and-a-half years in December as petrol prices plunged, suggesting there was expanding scope for another cut in interest rates if needed to support the economy.
The TD Securities-Melbourne Institute's monthly measure of consumer prices was unchanged in December from November, when it edged up by 0.1 percent.
December is normally a strong month for prices but this time a steep fall in petrol kept inflation restrained. The annual pace slowed sharply to 1.5 percent, from 2.2 percent in November. That was the lowest reading since July 2012.
Importantly for monetary policy, measures of underlying inflation also showed a marked moderation in price pressures, with the trimmed mean up just 1.7 percent on a year earlier and down from 2.4 percent in November.
The Reserve Bank of Australia (RBA) focuses on underlying inflation when setting interest rates, aiming to keep it in a range of 2 to 3 percent over the long run.
The slowdown in the TDMI figures will thus only add to market speculation about a cut in the current 2.5 percent cash rate. Interbank futures are fully priced for a move by May, though they imply only a slight chance of an easing at the RBA's next policy meeting on Feb. 3.
"The market turmoil of recent days and weeks is highly likely to leave the Board on the sidelines until the smoke clears," said Annette Beacher, head of Asia-Pacific research at TD.
The moderation in inflation led TD to drop its previous call for a hike in rates later this year and it now expects no move at all in 2015.
Official figures on consumer prices are due on Jan. 28 and are widely expected to show inflation slowed to below 2 percent in the fourth quarter of last year.
The TDMI survey highlighted the impact of falling oil prices with petrol diving 8.9 percent in December alone. Prices also fell for audio, visual and computing equipment and for non-alcoholic beverages, outweighing increases in fruit and vegetables and holiday travel and accommodation.
Inflation excluding fuel, fruit and vegetables rose by 0.2 percent in the month, to run at just 1.8 percent for the year.
Prices for tradable items fell 0.2 percent in December and grew only 0.2 percent for the year. Annual inflation in non-tradables remained far more stable at 2.5 percent.
(Reporting by Wayne Cole; Editing by Nick Zieminski)
