Inflation is expected to remain benign despite the weaker Australian dollar, giving the Reserve Bank scope to cut the cash rate further if needed.

The TD Securities/Melbourne Institute Monthly Inflation Gauge rose 0.2 per cent in September, following a 0.1 per cent rise in August and an increase of 0.5 per cent in July.

The rate for the 12 months to September was 2.1 per cent.

Underlying inflation is expected to remain in the bottom half of the RBA’s two-to-three per cent target band to the end of the year, TD Securities head of Asia-Pacific research Annette Beacher said.

“We forecast underlying inflation to rise by 0.5 per cent in the quarter, for an annual rate of 2.1 per cent,” Ms Beacher said.

“Although early signs of a pass-through of the weaker currency into imported prices are apparent and bear close watching.”

Although the RBA was widely expected to keep the cash rate at 2.5 per cent when it meets on Tuesday, it would be “prudent” if the RBA’s October statement referred to an easing bias, Ms Beacher said.

“We expect tomorrow’s RBA board meeting to be a lively one, debating the repercussions of the US Federal Reserve failing to deliver the well telegraphed tapering of bond purchases, and contrasting low overall inflation and rising unemployment with rising house prices and signs of a pick up in credit appetite,” she said.

“We believe the prudent path is to reintroduce an easing bias in the accompanying communique to send the message that the RBA board is prepared to continue supporting the transition from mining to non-mining growth.”

TD said the September result was driven by price rises for fruit, which increased 3.2 per cent, as well as vegetables, alcohol and audio, visual and computing equipment and services.

This was offset by falls in rents, new dwelling purchases by owner-occupiers, and newspapers, books and stationery.