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Australia consumer price index beats forecasts, rate hike still distant

Key Points
  • Australia's headline consumer price index rose 0.5 percent in the December quarter, beating expectations of a 0.4 percent increase.
  • However, core inflation has ended another year below the Reserve Bank of Australia's target band.
  • These outcomes cemented views that interest rates will remain at record lows for a long while. 
Office employees walk in front of the Reserve Bank of Australia in Sydney on September 4, 2018.
SAEED KHAN | AFP | Getty Images

Australian consumer prices beat expectations last quarter but core inflation ended another year below the central bank's target band, an outcome that cemented views interest rates will remain at record lows for a long while.

The local dollar jumped as the headline consumer price index (CPI) rose 0.5 percent in the December quarter, surpassing forecasts for a 0.4 percent increase.

Annual CPI inflation ran at 1.8 percent, again beating estimates. Key measures of underlying inflation favored by the Reserve Bank of Australia (RBA) averaged around 1.75 percent for the year, in-line with forecast.

The biggest price increases in the quarter came from tobacco, food and recreation while clothing and footwear, health services and transport all fell.

Core inflation has now undershot the RBA's long-term target band of 2 percent to 3 percent for 12 straight quarters, the longest stretch since the series began.