(25th January 2011 – Australia) The threat of an imminent interest rate increase has subsided, as the latest inflation levels defy many economists’ forecasts coming within the Reserve Bank of Australia’s target.The Consumer Price Index (CPI) has increasing by just 0.4 percent in the December quarter, the smallest increase since the March 2009 quarter, bringing the annual headline rate of inflation to just 2.7 percent.
Many economists’ were expecting a quarterly increase of 0.7 percent, which would have pushed the annual inflation rate out to 3 percent.
The most significant increase this quarter was for fruit and vegetables, which jumped 15.5 percent and 11.4 percent respectively, a widely expected increase due to natural disasters affecting many producers.
The Reserve Bank focuses on the underlying inflation rate, which strips out the most volatile items.
It came in at 0.4 per cent in the quarter and about 2.2 percent for the year.
That is well within the RBA’s inflation comfort zone of between 2 and 3 percent.