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AAP

2013-02-04

Inflation remains at a slow enough pace for the Reserve Bank of Australia (RBA) to again cut the cash rate but that's not expected to happen this month.

The TD Securities/Melbourne Institute Monthly Inflation Gauge rose by 0.3 per cent in January for a 2.5 per cent annual pace, which was in the middle of the RBA's two to three per cent target range.

Underlying inflation, the RBA's preferred measure, which excludes volatile price changes, was at 2.2 per cent for the 12 months to January.

TD Securities head of Asia-Pacific research Annette Beacher said even though inflation remained stable the RBA was unlikely to cut the cash rate at its February 5 board meeting - its first for the calendar year.

She said the economy was starting to feel the benefit from the 1.75 percentage points of interest rate cuts the RBA has delivered since November 2011.

"We believe past RBA action has set the stage for a decent revival in the housing sector to support growth, as the impact of mining investment fades by year end," she said in a statement.

"We conclude that the RBA is in a comfortable position to discuss the outlook and the risks at the board meeting tomorrow, without reducing the cash rate further, for now."

The RBA last cut the cash rate in December by a quarter of a percentage point to its current three per cent.

Ms Beacher said the headline January annual inflation figure had been pushed slightly higher, from 2.4 per cent in December, by seasonal factors.

The biggest price rises during January occurred in utilities, urban transport fares and education, though these were offset partially by falls in holiday travel and accommodation, clothing and footwear, and furniture and furnishings.

Ms Beacher said recent floods in NSW and Queensland could affect fresh produce prices over the next few months.