RBA expected to hold rates

The TD Securities-Melbourne Institute experimental monthly inflation gauge showed prices of consumer goods and services fell by 0.2 per cent in May to be 2.1 per cent higher than a year earlier.

Contributing most to the fall were lower petrol prices, offset by increases in the prices of fruit and vegetables. Taking out these volatile items, the core inflation measure rose by 0.1 per cent in May, to be 2.3 per cent up on a year earlier.

This left annual inflation in the bottom half of the target band of 2 to 3 per cent set by the RBA, whose policy-making board is expected to decide to keep rates on hold for a third month when it meets today.

The survey authors said the decline in prices during May confirmed that the pick-up in inflation in the early months of this year was transitory. Core inflation had not exceeded 2.5 per cent now for 18 months.

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