The annual inflation rate in Australia slowed down unexpectedly during the 2nd quarter, an indication that the pressure on the cost was decreasing after a sharp shrinkage at the beginning of the year. The Consumer Price Index registered an annual increase of 1.9% in the 2nd quarter, after a 2.1% increase in the previous quarter, according to the Australian Statistics Bureau in the quarterly inflation report on Wednesday. Comparing to the 1st quarter, the standard consumer price number accelerated 0.2%, after an increase of 0.5% in the first quarter.
Analysts called on average that the annual inflation rate will reach to 2.2%, and to raise the monthly rate by 0.4%. the consumer price index at the Australian Reserve Bank, which is an index of the core inflation, by 1.8% on annual basis. The core inflation rate rose by 0.5% during the quarter.
The annual inflation comes almost at mid-range for the central bank goal of a 1-3%. Last year, the consumer prices index dropped to its lowest level in decades, which pushed the Australian Reserve Bank to drop interest rates to new record levels. Analysts warn that inflation expectations might turn worst after the last leap in the Australian Dollar, as the Aussie is dealing at highest levels in many years against the USD. Strong local currency can mean a drop of 0.5% in the core inflation for the next 3 years, according to the central bank currency modeling.
The view of the Australian Reserve bank, moving by 10% in the currency will add or reduce 1% to the annual inflation ranging equally over 3 years.
The AUD/USD gained more than 0.5% during last month, and traded last at 0.7911.