CPI rises 0.5 percent in September quarter, in line with forecasts

CPI has risen in line with market expectations for September, according to the latest figures from the ABS.

The 0.5 per cent gains, described by many as "soft", were down from 0.6 per cent in the June quarter. 

"Despite the price falls for fruit and vegetables this quarter, the drought is impacting on the prices for a range of food products," ABS chief economist Bruce Hockman advised.

"Prices rose this quarter for meat and seafood (+1.7 per cent), dairy and related products (+2.2 per cent) and bread and cereal products (+1.3 per cent)."

The CPI rose 1.7 per cent through the year to the September 2019 quarter. This follows a through the year rise of 1.6 per cent to the June 2019 quarter.

"Annual inflation remains subdued partly due to price rises for housing related expenses remaining low, and in some cases falling in annual terms. Prices for utilities (-0.3 per cent) and new dwelling purchase by owner-occupiers (-0.1 per cent) both fell slightly through the year to the September 2019 quarter, while rents (0.4 per cent) recorded only a small rise," Hockman noted.

Source: James Foster @JFosterFM

The RBA prefer to measure core inflation, which eased to 1.4 per cent.

"No signs of an inflation breakout," Indeed APAC economist Callam Pickering suggested.

Westpac had forecasted 0.6 per cent in the September quarter, which even with that figure higher than the market forecasts, would be inline with their prediction for another rate cut before year end.

"While the RBA has been talking mostly about the unemployment rate in recent months, every CPI report is important for its forecasts which are updated just after the release," Westpac's Justin Smirk said.

"A core CPI reading in line with our expectations should keep markets pricing in a reasonable risk of another rate cut before year-end."

Alex Joiner, economist at IFM, said the figures were in line with RBA's data, which might give them another quarter to asses the data.

CommSec's Craig James says the headline inflation rate is creeping, rather than leaping, towards the Reserve Bank's two to three per cent target band.

"The Reserve Bank is expected to wait until at least February 2020 to decide if more interest rate stimulus is required," James said.