Inflation surprises to three-year low in Australia

Market participants and economists were taken by surprise as Reserve Bank of Australia's (RBA) preferred measure of inflation dipped to three year low in third quarter.

• CPI rose by 0.5% in third quarter compared to 0.7% in the second and up 1.5% for 12 months to September.
• However, Reserve Bank of Australia's preferred measure trimmed inflation rose only by 0.3% in third quarter, which is weakest since third quarter last year. Yearly CPI came at 2.1%, against median expectation of 2.4%, which is lowest since second quarter of 2012.

Breakdown of key components -

• Most significant price rises were observed in Fruit (+8.2%), Travel and accommodation (4.6%), Property rates and charges (+4.6%).
• Biggest contributors to the drop were Vegetables (-5.9%), Telecommunication equipment and services (-2%) and Automotive fuel (-1.7%).

Australian Dollar has taken a sharp hit as the drop was significant and moreover unexpected. Australian Dollar is currently trading at 0.712 down close to 80 pips from today's high.