Australian headline inflation likely to have slowed down year-on-year in Q1 2019

Australia’s headline inflation data for the first quarter is likely to have come in flat. According to an ANZ research report, the annual rate is likely to have slowed down to 1.4 percent in the March quarter. A sharp decline in petrol prices is the largest negative for the headline figure, as in the fourth quarter of 2018. Alcohol & tobacco, pharmaceutical products and education are expected to have made positive contributions.

Core inflation is likely to have risen 0.4 percent quarter-on-quarter, which lowers the annual rate to 1.7 percent. The risks to core inflation are seen as balanced for the quarter.

The projection for core inflation is widely in line with what the Reserve Bank of Australia published in its February Statement on Monetary Policy. The central bank needs a little over 0.9 percent inflation in the first half of 2019 to reach its 1.75 percent year-on-year trimmed mean forecast for June 2019.

“If core inflation for the quarter comes in at 0.3 percent or lower, it is likely that the near-term inflation outlook will need to be revised lower. A lower starting point will challenge the return to 2 percent over the medium-term and thus make a rate cut in May a real possibility”, added ANZ.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was bullish at 98.7001 while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 11.4234 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex