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AAP

2012-11-05

EDS: NOT TO BE USED UNTIL 1030 AEST, Monday, Nov 5, 2012

By Caroline Smith

SYDNEY, Nov 5 AAP - The Reserve Bank of Australia might still keep its finger off the interest rate button despite a private sector survey showing slower growth in consumer prices.

The TD Securities Melbourne-Institute monthly inflation gauge, released on Monday, showed that consumer prices rose by 0.1 per cent in October after a lift of 0.2 per cent in September and a 0.6 per cent gain in August.

In the 12 months to October, the gauge rose 2.4 per cent.

The rise for October was attributed to increased prices for communications, newspapers books and stationary, and domestic holiday travel and accommodation.

These were offset by weaker readings for fruit and vegetables, bread and cereals, and audio visual and computing equipment and services.

The price of fruit and vegetables fell 4.6 per cent in October, after large rises in August and September.

TD's estimate of the trimmed mean measure of underlying inflation, which filters out extra-large rises and falls, recorded annual growth of 2.1 per cent.

TD Securities head of Asia-Pacific Research Annette Beacher said these figures were a "first peek" at inflation in the December quarter.

They showed inflationary pressures were "relatively benign", with key underlying and headline measures in the lower half of the RBA's two to three per cent inflation target band, she said.

But figures released by the Australian Bureau of Statistics (ABS) in October showed underlying inflation jumping to 2.5 per cent over the year to the September quarter, from 2.1 per cent previously.

That jump, which surprised economists, might be enough to steady the RBA's hand when it meets on Tuesday, Ms Beacher said.

"Combined with stability in global markets, a bounce in iron ore prices and better activity and survey data from number one trading partner China in recent weeks, it adds to the case for ``wait and see' for the RBA board meeting tomorrow," she said.

At its previous meeting on October 2, the RBA cut the cash rate by a quarter of a percentage point, to 3.25 per cent.