Inflation to remain low despite falling Aussie dollar

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The chief economist of an ETF provider has said inflation is likely to remain low despite the falling Australian dollar.

The Australian Bureau of Statistics is set to release its December CPI figures today, and BetaShares chief economist David Bassanese has predicted inflation to remain low, despite the "major decline" in the Australian dollar over the past year.

“The RBA's preferred measures of underlying inflation are likely to show annual inflation of not much more than 2%. Falling petrol prices, subdued spending and intense competition in the retail sector are contributing to only muted price pressure, which should leave the door open for an RBA rate cut should the economy require it over the next few months," he said.

But Bassanese said it is unlikely that the Reserve will cut rates at its first meeting of the year.

“At this stage, however, a low CPI result is not expected to result in a rate cut as early as next week as local employment and business confidence indicators remain encouraging.  That picture could change, however, were volatility in global financial markets to intensify and/or the local housing sector to weaken considerably further.”