Inflation stalls, rate cut prospects rise

The Australian dollar has taken another hit after inflation evaporated in the March quarter, increasing the chances of a Reserve Bank interest rate cut.

Annual inflation slowed to 1.3 per cent for the 12 months to March 31 after the consumer price index showed zero growth in the quarter, falling well short of the already weak 0.2 per cent expected by the market.

“The March quarter 2019 CPI was a result of price rises in a number of goods and services being fully offset by a number of price falls,” the Australian Bureau of Statistics said on Wednesday.

“This was consistent across most of the capital cities”.

The weak print followed a rise of 0.5 per cent in the December quarter.

The Australian dollar was already falling but dropped another half cent against the US dollar to 70.40 US cents in the 25 minutes after the data’s release.

The most significant rise in the March quarter was the 7.7 per cent increase in vegetable prices as drought and adverse weather hit food production, while there was a 4.2 per cent rise for secondary education, and a 2.4 per cent rise for motor vehicles.

The rises were offset by an 8.7 per cent fall in automotive fuel, a 3.8 per cent fall in domestic travel and accommodation, and a 2.1 per cent fall in international travel and accommodation.

AAP

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