The RBA’s stated objective is to achieve an inflation rate of between 2% and 3%, “on average, over time.” Since the GFC, Australia’s inflation rate has been trending lower and lower and it has been below the RBA’s target band for some years now. Despite the RBA’s desire for a higher inflation rate, attempts to accelerate inflation through record-low interest rates have failed so far. The latest unofficial measurement of consumer inflation has provided any indication that story has changed.
The Melbourne Institute’s latest Inflation Gauge index increased by 0.1% in October following a 0.1% increase in September and a flat result in August. On an annual basis, the index increased by 1.5%, the same rate as in September.
US Treasury yields had increased on Friday night, lending support for higher yields in the domestic market on Monday when the Inflation Gauge figures came out. However, September retail sales and the ANZ’s Job Ads figures were also released on the same day and so the individual effect of each report is difficult to ascertain. By the end of the day, 3-year, 10-year and 20-year ACGB yields had all increased by 3bps to 0.86%, 1.21% and 1.61% respectively.