Correction to Australia Inflation Story

By James Glynn Features Dow Jones Newswires

Australian inflation was more muted than expected in the second quarter, reflecting weak wages, lower fuel costs and a surprise drop in fruit prices.

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Measures of core inflation remained well below the central bank's desired 2% to 3% band, which is likely to keep interest rates on hold for some time yet.

Consumer prices rose by 0.2% versus the first quarter and were up 1.9% from a year earlier, the Australian Bureau of Statistics said Wednesday.

Economists had expected consumer prices to rise by 0.4% in the quarter and by 2.2% from a year earlier.

Core inflation rose by 0.5% in the quarter, in line with the expectations of economists. It was 1.8% higher than a year ago.

The data are broadly consistent with the Reserve Bank of Australia's forecast for inflation, and so won't prompt any big shift in the outlook for interest rates.

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The RBA is likely to remain concerned about weak wages growth. If there is no increase in Australian wage pressures then the RBA could become concerned inflation may not return to its target band as expected.

For now, the RBA remains neutral on the outlook for policy, with the official interest rate stuck at a record-low 1.5% since August last year.

-Write to James Glynn at james.glynn@wsj.com

Corrections & Amplifciations

Story corrected at 0330 GMT. Original referred to an increase in wage pressures in the seventh paragraph.

If there is no increase in Australian wage pressures then the RBA could become concerned inflation may not return to its target band as expected. "Australian Inflation Muted in 2Q," at 0133 GMT, referred to an increase in wage pressures in the seventh paragraph.

(END) Dow Jones Newswires

July 25, 2017 23:44 ET (03:44 GMT)