Australia TD Annual Inflation Rises to Middle of RBA Target

A private gauge of Australian inflation advanced to the middle of the central bank’s goal on costlier fruit, vegetables and utilities, adding to the case for the central bank to hold rather than cut interest rates.

Consumer prices rose 2.5 percent in January from a year earlier after a 2.4 percent year-on-year increase the prior month, an index compiled by TD Securities Inc. and the Melbourne Institute released in Sydney today showed. They climbed 0.3 percent from December, when they gained 0.4 percent.

Reserve Bank of Australia Governor Glenn Stevens has cut the overnight cash-rate target by 1.75 percentage points since Nov. 1, 2011, to 3 percent to stimulate areas of the economy outside mining, where investment is predicted to peak this year. Investors are pricing in an 18 percent chance he will ease monetary policy an additional quarter percentage point at a board meeting tomorrow.

“Past RBA action has set the stage for a decent revival in the housing sector to support growth, as the impact of mining investment fades by year end,” Annette Beacher, head of Asia- Pacific research for TD Securities Inc. in Singapore, said in a statement. “The strong Australian dollar has allowed numerous goods and services to be imported at discount prices.”

Today’s inflation gauge showed fruit and vegetable prices rose 1.2 percent, while utilities and education costs also gained. The cost of fuel fell by 0.6 percent, and clothing and footwear also declined, it showed.

The central bank targets inflation in a range of 2 percent to 3 percent on average.

The Melbourne Institute is a research unit of Melbourne University, and TD Securities is a division of Toronto-Dominion Bank (TD), Canada’s second-largest lender. The monthly inflation index measures the prices of more than 1,000 goods and services.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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