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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 US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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