Australian inflation continues to ease

Australian inflation has slowed at a quicker rate than anticipated, boosting hopes of a rate cut in May, reports the BBC.

Consumer prices increased by 0.1 per cent during the opening three months of 2012 in comparison with the previous quarter, revealed the statistical office. The annual price growth rate was 1.6 per cent, way below most analysts’ forecast figure of 2.1 per cent.

Call for a cut to the rates have been mounting as the country’s economy has slowed, impacted by weaker global demand. National Australia Bank’s Spiros Papadopoulos said that this reaffirms that there is not much inflationary pressure in the country’s economy and that the Reserve Bank of Australia (RBA) is still on course to reduce interest rates.

Mr Papadopoulos went on to explain that the RBA will most likely wait to see how the economy reacts to the cut in rates which they are expected to introduce in May. He said there is a likelihood that there will be additional cuts based on continuing weak data further down the line.

Australia’s main interest rate is currently at 4.25 per cent after having been put up to help combat increasing inflation. But in recent months, several factors have combined to help slow price growth down. The country released growth figures in March, which revealed that gross domestic product went up by 0.4 per cent over the three months ending 31 December, with analysts having forecast growth of 0.8 per cent.

The Australian dollar, at the same time, has remained strong, reducing the cost of imported goods like fuel and food. Consumers have continued to spend, although many have become more cautious concerning their outlook for employment and earnings power.