Australia | Mar 01 2010
By Rudi Filapek-Vandyck
The TD Securities-Melbourne Institute Monthly Inflation Gauge rose by 0.1% in February, following an outsized 0.8% rise in January and a 0.3% rise in December 2009. In the twelve months to February, the Inflation Gauge has now risen by 1.9%.
TD Securities economists highlight the annual rate has now dipped below the RBA’s 2 to 3% target band, but they also add there are favourable base effects arising from the dropping out of the outsized 0.7% rise in February 2009.
They note contributing most to the overall change in February were price rises for food, alcohol and tobacco, and books, newspapers, and magazines. These were offset by a "substantial seasonal fall" in prices for holiday travel and accommodation, as well as smaller declines in automotive fuel, and audio, visual and computing equipment.
The TD trimmed mean measure rose by 0.1%, to be 2.0% higher than a year ago.
Annette Beacher, Senior Strategist at TD Securities, concludes that “runaway inflation isn’t entrenched, yet.”
Having said so, she also continues by stating: “We remain concerned that the RBA’s inflation projections are somewhat optimistic, expecting a gentle deceleration to the mid-point of the target with minimal interest rate adjustment. As the unemployment rate continues to shrink and spare capacity is all but absorbed, the RBA Board tomorrow can comfortably recommend another 25 basis point rate rise to 4.0%.”
Professor Don Harding, believes data to February suggest the March quarter CPI is likely to rise by 1%. This would yield an annual inflation rate of almost 3% in the four quarters to March 2010.