The Melbourne Institute Inflation Gauge recorded a rise for a third month in a row in October. The latest reading indicates consumer prices rose by 0.2% for the month and 1.5% year on year. While October’s monthly figure is less than September’s 0.4%, the year-on-year figure is higher than September’s 1.3%.
Readers will see from the chart below how the Inflation Gauge is an excellent estimator of annual CPI figures produced by the Australian Bureau of Statistics. Consumer inflation over the last five years has been edging down quite consistently, which has provided the RBA with an environment in which it could lower the official rate to a record low.
This latest figure, while above-average on a monthly basis, is still some way from marking the end of inflation’s downtrend. There have been months earlier this year where the Inflation Gauge figure has been equal or higher, only to be followed by a month with a negative figure. Economists and the RBA will require quite a few more months of figures above 0.2% before they gain confidence inflation has risen back to the RBA’s 2% to 3% target band.