Australia month-to-month inflation slows in October, hints at potential peak By Reuters

By Wayne Cole

SYDNEY (Reuters) – Australian inflation slowed in October as costs for fruit and greens fell sharply and holidays prices took a shock dip, an surprising flip that would imply rates of interest won’t should rise so far as some anticipated.

Information from the Australian Bureau of Statistics on Wednesday confirmed its month-to-month shopper value index (CPI) had risen 6.9% within the yr to October, slowing from 7.3% in September.

That was shock to analysts, who had seemed for an increase to 7.4% or greater in October, and was a potential trace that inflation is perhaps peaking.

Certainly, a carefully watched measure of core inflation, the trimmed imply, rose a comparatively muted 0.3% in October from the earlier month, the smallest improve since November final yr.

Annual development within the trimmed imply slowed to five.3% in October, from 5.4%, once more a shock to analysts, who had seemed for a rise to round 5.7%.

This might be a nice shock for the Reserve Financial institution of Australia (RBA), which has needed to carry rates of interest by 275 foundation factors to a nine-year excessive of two.85% in an effort to comprise inflation.

The RBA has anticipated shopper value inflation would peak at about 8% this quarter, however now that is perhaps too pessimistic.

Markets are nonetheless wagering the RBA will elevate its money fee by one other 25 foundation factors at its December coverage assembly subsequent week. But in addition they trimmed the anticipated peak for rates of interest to three.65%, from 3.72% earlier than the CPI launch and as a lot as 4.20% final month.

Three-year bond futures climbed 5 ticks to 96.80 and interbank futures edged greater as traders lowered the probably prime for charges.

Wednesday’s information confirmed inflation in October had been dragged down by a 6.3% drop in fruit and vegetable costs from September as rising circumstances improved, although latest flooding might see costs climb once more in direction of the tip of the yr.

Prices for holidays and journey additionally fell in October, by 6.4%, with the ABS saying airfare costs had eased as faculty holidays got here to an finish and demand slackened for journey overseas.

This new, month-to-month collection comprises solely about two-thirds of the value information used within the ABS’s conventional quarterly CPI, so there’s a threat of the inflation consequence for your complete October-December quarter being a lot greater.

Particularly, the October launch doesn’t embrace utility prices, that are prone to bounce this quarter attributable to rising electrical energy and fuel costs.

” We would not learn an excessive amount of into the drop within the Month-to-month CPI Indicator in October as a result of the figures do not cowl your complete CPI basket,” mentioned Marcel Thieliant, a senior economist at Capital Economics.

“Nonetheless, the figures do counsel that inflation is about to peak.”