Headline inflation figures plummet

A significant decrease in the latest TD Securities-Melbourne Institute inflation gauge to its lowest levels in more than three years has increased the possibility for further interest rates cuts in the coming months. The median expectation from a panel of Bloomberg economists predict that the February 3 rate decision will be a 0.5 percent cut, with almost a third of the 18 economists hedging their bets on rates to fall to 3 per cent in the second half of the year. The annual headline inflation figure peaked at 4.8 per cent in June, dropping by 0.2 per cent in December to give an annualised rate of 2.2 per cent. Joshua Williamson, a senior strategist at TD Securities, confirmed that high inflation was no longer a key concern for the year, with two quarters of price deflation set to take place.

Source: The Australian Financial Review