Australia’s consumer price inflation during the second quarter is expected to repeat its dark performance during the year’s first quarter, dipping to a fresh low that may call for another rate cut by the Reserve Bank of Australia as early as next month.
During the first quarter, the major drags on inflation were petrol and fresh fruit, which contributed to a 0.2 percent drop in prices. The CPI is seen rising 0.4 percent in the second quarter, though the annual pace would still slow to 1.1 percent, Reuters reported.
According to a Reuters poll of analysts, if core inflation in Australia comes to a fresh low of 1.4 percent in Q2, it might force the central bank to take up another rate cut stance after trimming the cash rate a quarter point to 1.75 percent in Q1.
On the other hand, few analysts believe that a slight increase of even 0.6 percent or higher may posit the RBA to pause on rate cuts for a while a result of 0.4 percent or less will shatter all hopes. However, a rise of 0.5 percent would call for a close chance, the report said.
“Underlying inflation in line with expectations would reinforce the weak trend, and in combination with softer labour and housing markets and a relatively elevated AUD, would be sufficient reasons for the RBA to cut,” Reuters reported, citing Felicity Emmett, Head, Australian Economics, ANZ.
Meanwhile, a set of other factors also remain responsible behind the slowdown as a price war in the retail segment of the economy and a resilient Australian dollar have weighed on record-low wages to push the economy into turmoil.