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Thursday, July 23 2015

The headline consumer price index came in at a lower than expected 0.7 per cent from the March quarter for a 1.5 per cent rise from a year earlier. 

So-called trimmed mean inflation, which strips out volatile price changes, was 0.6 per cent in the second quarter and 2.2 per cent from a year earlier. Economists had tipped gains of 0.6 per cent and 2.1 per cent.

Core inflation remains firmly within the bottom half of the Reserve Bank of Australia's 2-to-3 per cent target range, preserving its ability to cut the official cash rate again if needed.

"With sub-trend growth in the economy, low wages and a global environment characterised by low inflation and strong competitive pressure, the inflation outlook is not a constraint should a weaker than expected demand outlook put the RBA in a position of needing to act on its easing bias," said ANZ Bank analysts Jo Masters and Katie Hill.

Prices that were under upward pressure included medical and hospital services, which gained 4.5 per cent, the ABS said. Domestic holiday travel and accommodation fell 5.4 per cent.

Josh Williamson, an economist at Citigroup, said if either growth or inflation fail to show signs of strengthening later this year the Reserve Bank will cut the official cash rate by 0.25 of a percentage point to a record-low 1.75 per cent in November.

"Moderate inflation – in the lower half of the 2-to-3-per-cent target band in underlying terms – buys the RBA more time to leave the already accommodative stance of monetary policy unchanged," said David de Garis, a senior economist at NAB Bank.

Posted by: Greg Carroll AT 10:09 am   |  Permalink   |  Email