TD Securities: No inflation in February but the RBA won't cut tomorrow

Inflation was absent in Australia during February.

The TD Securities – Melbourne Institute Monthly Inflation Gauge was flat last month following a 0.1% rise in January. This saw the year-on-year rate of inflation fall to just 1.3% from 1.5% in the twelve months to January.

Rises for fuel (+4.7%), utilities (+0.8%) and insurance (+1.1%) were offset by falls in fruit and vegetables (-5.3%), holiday travel and accommodation (-3%) and newspapers, books and stationery (-1.2%).

TD’s measure of core inflation, which takes out volatile items, was also flat. This left the year on year rate at 2.3%.

One rally interesting part of the inflation data however is the divergence between domestic prices and imported prices with the index showing “the tradable inflation measure fell by 0.6 per cent while the non-tradable inflation measure rose by 0.4 per cent in February.

Annette Beacher, TD Securities Head of Asia Pacific Research, said that, “inflation pressures remain relatively benign at the moment which should be supportive for the RBA to cut rates further in this cycle.”

But, Beacher isn’t in the rate cut camp for tomorrow. Rather, she says the RBA Board is likely “to signal a move to an explicit easing bias and to offer easier policy to support demand should that prove necessary.”

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