Australian CPI rose in the 3 months through June

The consumer prices index gained 0.5 percent from the first quarter, when it advanced 0.1 percent, the Bureau of Statistics said. Annual core inflation was 4.2 percent, which is above the central bank’s target range of 2 percent to 3 percent.

Health costs rose 2.3 percent in the second quarter and prices of household contents and services advanced 2.2 percent. By contrast, banking services charges fell 1.7 percent and food slipped 0.9 percent. The annual headline inflation rate slowed to 1.5 percent from 2.5 percent.
The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published. The weighted-median gauge of inflation advanced 0.8 percent in the quarter for an annual increase of 4.2 percent, the eighth quarter that the measure has held above the Reserve Bank’s target range.

Australia’s monetary board left the overnight cash rate target at 3 percent on July 7for a third month after cutting it by a record 4.25 percentage points between September and April.

Consistent with the Board’s forward-looking approach to monetary policy, this rapid and large easing of monetary policy was made in anticipation of a very weak domestic economy and a decline in inflation from elevated levels. At its meetings since April, the Board has held the cash rate constant at 3 percent. Over much of this period, it judged that the inflation outlook provided some scope for a further reduction in the cash rate to below 3 percent if that were needed. However, the recent stronger-than-expected economic data and the general improvement in sentiment both in Australia and abroad have reduced the likelihood that a further reduction will be required.