Inflation is rising towards the top of the Reserve Bank of Australia’s target range, putting pressure on the central bank to raise interest rates, according to a survey of price movements.
The TD Securities-Melbourne Institute Monthly Inflation Gauge shows prices rose 0.2 per cent in February and were 2.7 per cent higher than a year ago, putting inflation towards the top of the RBA’s target two to three per cent range.
TD Securities Head of Asia Pacific Research Annette Beacher says the figures show inflation is speeding up.
“Using mid-quarter prices now available, our inflation gauge measure is showing worrying signs of further price acceleration,” he said.
“The clear signal is that inflation pressures continue to build rapidly, pressing against, if not punching through, the upper bound of the RBA two to three per cent target range.”
Ms Beacher said a rising inflation rate would put pressure on the RBA to lift the cash rate, currently at 2.5 per cent, by the end of the year.
“As inflation is already above the mid-point of the RBA target band, we expect the RBA to begin withdrawing some extraordinary stimulus by year end, and we target a cash rate of 3.0 per cent by December.”
The inflation gauge shows fruit and vegetable prices rose 1.7 per cent in February while fuel prices lifted 1.2 per cent.
These were offset by falls in holiday and travel accommodation, bread and cereal products, newspapers, books and stationary.
