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Inflation is expected to fall in August to sit within the RBA’s target range, strengthening economists’ forecasts that the RBA will keep a hold on the cash rate until the end of the year.
According to the Melbourne Institute Survey of Consumer Inflationary Expectations, released yesterday, the median expected inflation rate decreased from 3.3 per cent in July to 2.8 per cent in August.
In addition, the proportion of consumers expecting inflation to be within the RBA’s 2 to 3 per cent band has fallen slightly from 19.1 per cent in July to 18.9 per cent in August.
Melbourne Institute research fellow Dr Michael Chua said this month’s inflationary expectations reflected a weaker than expected June Consumer Price Index (CPI).
“The number of respondents expecting inflation to rise has decreased from 78.9 per cent in July to 73.5 per cent in August, conversely the number of people expecting inflation to stay the same, has risen to 16.6 per cent from 11.4 per cent,” he said.
The CPI expectations were accompanied by the news yesterday that unemployment moved upwards in in July for the first time in five months.
The surprise lift saw the unemployment rate move to 5.3 per cent, from 5.1 per cent in June, adding to expectations for the official cash rate to stay on hold next month.
Many banks have tipped that rates will stay on hold until the end of 2010, including Westpac and NAB.