Latest inflation reading, released today, for fourth quarter of 2015, shows Reserve Bank of Australia (RBA), still has room for further easing, if it do want to ease.
According to the report, Inflation just edged up just 0.4% in fourth quarter, which is higher by 1.7% only from a year ago. RBA's preferred measure, trimmed mean, which excludes volatile components to some extent, is up 0.6% and 2.1% from a year ago.
Biggest contributors inflation have been, Alcohol and Tobacco (+2.7%), Clothing and Footwear (+1.6%) and insurance and financial services (+0.8%) in the fourth quarter, whereas Communications (-2.4%), Transport (-1.4%) and Health (-0.4%) were biggest drag.
Annually, Alcohol and Tobacco (+6%) was biggest contributor, followed by Education (+5.5%) and Health (+5.3%) and biggest frags were Communications (-6.3%) and Transport (-1.4%).
Despite trimmed mean's 2.1% annual rise, RBA still has room for further easing if it wants to. Current RBA objective is to keep inflation checked between 2-3% range.
We, at FxWirePro, RBA is likely to stay put at least through first quarter of 2016 -
- Lower exchange rate might be contributing higher import cost and inflation.
- Lower rates encouraged excessive house purchase, which is cooling down just recently.
- RBA would prefer to keep powder dry for scenarios, where China's economic downturn worsens.
Australian Dollar is currently trading at 0.704 against Dollar.
