Inflation expectations slip

Inflation expectations were down 0.1% to 4.2% in December, their lowest level since mid-2017, the latest Roy Morgan Inflation Expectations Index show.

Roy Morgan CEO, Michele Levine, said overall inflation expectations have now fallen for two straight months.A longer-term analysis showed the indicator has now been stuck in a narrow band between 4.2-4.5% for two years since late 2016.

“This long period of stability in inflation expectations since late 2016 closely tracks a record period of interest rates remaining unchanged. The Reserve Bank has now completed two calendar years without moving interest rates although expectations are growing that the bank may be forced to act during 2019 if house prices continue to decline,” Levine said.

Analysis of inflation expectations by state showed a mixed picture with expectations up in Queensland, the highest of any state, and up slightly in New South Wales and Western Australia, but down in other states. Inflation expectations fell for supporters of all political parties and most significantly for younger women under 50 years of age and for men aged 35 years and older.

Other Roy Morgan leading indicators, including business and consumer confidence, have weakened in recent months as uncertainty about the direction of the Australian economy in 2019 increased.

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