Australian dollar falls
On Wednesday’s close, the local currency has slipped after weaker-than-expected inflation data cemented views policy would remain accommodative for a long time to come.
The Australian dollar was last down 0.3 per cent at 70.86 US cents.
It went as low as 70.72 US cents in the aftermath of Wednesday’s figures which showed core measures of inflation closely watched by the central bank rose an average 1.75 per cent in the third quarter compared with 1.9 per cent in the second.
The headline consumer price index crawled at 1.9 per cent for the year, in-line with forecasts but below the 2.1 per cent pace in the second quarter.
Core inflation has now undershot the RBA’s long-term target band of two per cent to three per cent for the 11th quarter on the trot, the longest run of misses on record.
As a result, the RBA has kept interest rates at an all-time low of 1.5 per cent since August 2016.
Interest rate futures do not fully price in a hike to 1.75 per cent until March 2020.
Analysts said the RBA is likely to look through the weakness in the third-quarter data as it was well flagged and included some one-off price decreases in government-administered services such as child care.
“But if Q4 is low it would be material for the RBA’s ‘next move is up’ view,” said George Tharenou, Sydney-based economist at UBS.
RBA Governor Philip Lowe has repeatedly signalled the next move in interest rates will be an increase.
The last time the RBA tightened policy was in November 2010 to 4.75 per cent.
“Despite strong gross domestic product growth and falling unemployment, low CPI and (easing) house prices…(will) keep the RBA on hold till 2020,” Tharenou wrote in a note to clients.
Australian government bond futures slipped, with the three-year bond contract down 1.5 ticks at 97.955.
The 10-year contract eased 3.5 ticks to 97.375.
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