Inflation is still at very subdued levels, but a falling Australian dollar could push the price of imported goods higher.

The TD Securities/Melbourne Institute Monthly Inflation Gauge was 0.0 per cent in June, following a 0.3 per cent increase in May.

The rate for the 12 months to June was 2.4 per cent, in the middle of the Reserve Bank of Australia’s two to three per cent target range.

TD Securities head of Asia-Pacific research Annette Beacher said she expects inflation to stay in the bottom half of the RBA’s target bank for the remainder of the year.

However she warned that the falling Australian dollar’s effect on the price of imported goods bears close watching.

A lower currency pushes up the price of imports and the local dollar has lost over 10 US cents since early May.

The RBA board meets on Tuesday and is widely expected to keep the cash rate unchanged at a record low of 2.75 per cent, but Ms Beacher says it could be a close decision.

“We expect tomorrow’s RBA board meeting to be a lively one, debating the impact of the US Federal Reserve tapering bond purchases by year end and making sense of the mixed signals from the domestic economy,” she said.

“While financial markets are volatile, and domestic politics takes centre stage, we believe it is prudent for the board to remain on the sidelines for now.”

Ms Beacher said if the Australian dollar stays closer to 90 US cents rather than 100 US cents, the chances of a central bank rate cut will remain well below 50 per cent.

“We remain of the view that a change of government with a strong majority is more likely to kick-start the economy and boost confidence, not another cash rate reduction,” she said.

There were rises in the cost of fuel, holiday travel and accommodation, and new dwelling purchase by owner-occupiers in June, the report said.

These were offset by falls in the price of fruit and vegetables, furniture and furnishings, as well as footwear.