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Australia’s Q1 CPI figures print flat increasing estimates of a May rate cut

Official figures show Australian CPI printed flat in Q1, causing the Australian dollar to take a tumble.

According to the Australian Bureau of statistics (ABS), the Australian CPI in March 2019 was recorded flat at 0.0%, compared with a rise of 0.5% in the December quarter 2018.

The flat number was a result of price rises in a few goods and services being fully offset by a few price falls, according to the ABS.

The CPI rose 1.3 % through the year to the March quarter 2019, after increasing 1.8% through the year to the December quarter 2018.

Reserve Bank of Australia

The soft Q1 CPI data has in turn increased expectations of a near-term rate cut by the Reserve Bank of Australia (RBA)

According to Eikon RBAWATCH, the market is pricing in a 45% chance of a May interest rate cut by the RBA.

Most significant price rises and falls

During the March quarter, vegetables rose 7.7%, secondary education 4.2% and motor vehicles rose 2.4%. It comea as, dire weather conditions and drought caused a reduction to the supply of a selection of fruits and vegetables.

Some of the other significant price falls in the March quarter were automotive fuel, falling 8.7%, while domestic holiday, travel and accommodation fell 3.8%. International holiday, travel and accommodation fell 2.1%.

Lower world oil prices at the end of 2018 saw automotive fuel prices fall 6.1% in January, before rising in February and 5.2% in March.

Australian dollar price

AUD/USD tumbled on the news, falling to $0.7050, while the ASX leaped higher up 0.9%, at time of writing.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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