Latest inflation figures spark interest rate speculation
Consumer price index (CPI) has remained in the Reserve Bank of Australia’s target band, according to the latest Australian Bureau of Statistics (ABS) inflation figures, renewing expectations of an interest rate cut within the first half of the year.
The Australian Bureau of Statistic’s latest inflation figures have bolstered the market’s expectation of a rate cut in the first half of 2025, experts have indicated.
The latest figures show that CPI remains in the Reserve Bank’s target band at 2.3 per cent, representing a small increase from 2.1 per cent in October.
Core inflation fell from 3.5 per cent to 3.2 per cent.
Bendigo Bank chief economist David Robertson said that he expects an interest rate cut call in May: “We continue to forecast three cuts this year although still expect the first to be in May, by which time we hope the RBA has enough evidence to reduce rates by 35 basis points to an even 4 per cent.”
Robertson, however, outlined that a fuller picture of CPI is required with the next iteration of quarterly data, as government payments continue to mask the full impact of CPI.
“The November data had a better cover of services inflation than the previous month, however the timing of government subsidy payments continues to distort the numbers, so we need to see the full quarterly data (released on 29 January) before we can draw any firm conclusions.”
Leanne Pilkington, president of the Real Estate Institute of Australia, explained that the findings reinforce the belief that interest rate cuts will be on the horizon.
“The consistent downward trend in the figures support market expectations of a rate cut at the next RBA meeting in February which would provide a welcome relief for borrowers,” she said.