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Inflation gauge shows no carbon effect
Inflation gauge shows no carbon effect

A private measure of inflation has posted its largest monthly increase in almost 18 months but very little is from the carbon tax.

The TD Securities-Melbourne Institute inflation gauge rose 0.6 per cent in August, the biggest month-on-month increase since March 2011.

TD Securities head of Asia-Pacific Securities Annette Beacher said there did not appear to be any notable impact from the July 1 introduction of the carbon tax, given the unchanged state of utility prices in August.

"While fruit and vegetable prices rose strongly, it is difficult to extract if the carbon tax is a contributing factor," she said.

The latest monthly increase follows a 0.2 per cent rise in July but a 0.2 per cent fall in June, according to the survey published today.

The inflation gauge rose 2.2 per cent in the year to August - which was well within the Reserve Bank of Australia's 2 to 3 per cent inflation target band.

The main price rises were in fruit and vegetables, automotive fuel, and alcohol and tobacco.

They were offset by falls in footwear, holiday travel and accommodation, and audio visual and computing equipment, and services.

"We are of the view that underlying inflation will continue to hug the lower bound of the RBA two to three per cent target range for longer," Ms Beacher said.

RBA board will met on Tuesday and is widely expected to keep its cash rate on hold at 3.5 per cent.

However the market is expecting a further rate cut later in the year, if overseas factors such as the slowdown in China and the euro zone crisis continue to weigh on the domestic economic outlook.