Australia’s private inflation gauge declines in July; likely to warrant rate cut by RBA

A private measure of Australian inflation index declined during the month of July, warranting a likely rate cut by the Reserve Bank of Australia in its monetary policy meeting scheduled to be held on August 2. The central bank is expected lower interest rates to a new all-time low of 1.5 percent in an attempt to inject inflationary pressures into the economy.

The TD Securities-Melbourne Institute consumer inflation gauge fell 0.3 percent from June and was up 1 percent from a year ago. Consumer inflation spiked 0.6 percent in June, the biggest monthly gain in two-and-a-half years. The Melbourne Institute’s inflation index provides a monthly snapshot of consumer price trends in Australia, as opposed to the official reports which are released quarterly.

Meanwhile, quarterly inflation amounted to 0.4 percent in April-June. However, annual inflation weakened to just 1 percent, the lowest in 17 years. However, inflation has failed to persist in the Australian economy, following lower commodity prices that remained a drag on most advanced industrialized economies.

In addition, last week the Reserve Bank of Australia’s official CPI gauge showed modest improvements in consumer inflation during the second quarter, which could give policymakers enough scope to hold off on cutting interest rates for the time being, reports said.

In addition to the RBA and the Australian government will also release the official data on building permits and trade on Tuesday. On Thursday the Australian government is likely to report on retail sales, an important proxy of consumer spending.