Homeowners holding out for a rate cut might finally see some relief, with new Consumer Price Index data from the Australian Bureau of Statistics showing annualised inflation is slowing.
The steady fight against inflation continues, with positive signs of progress.
Annualised CPI in Australia is growing at 2.4 per cent, according to the Australian Bureau of Statistics, down from 2.8 per cent reported in the September quarter. The latest announcement discloses that quarterly CPI rose 0.2% in the last quarter of 2024, holding steady from the September quarter result.
This is good news for consumers, confirms Saxo Asia Pacific trader Junvum Kim.
“This softer-than-expected inflation data could amplify expectations for a February Reserve Bank of Australia rate cut and bolster the Reserve Bank’s confidence in steering inflation back to its target within a reasonable timeframe,” says Kim.
The 2.4 per cent growth rate is in line with the RBA’s target of keeping inflation at the midpoint of 2 per cent to 3 per cent.
“Market sentiment is responding, with money markets now pricing in nearly a 90% chance of a February rate cut. Additionally, it’s worth noting that food, non-alcoholic beverages, and housing have recorded their slowest year-over-year growth since 2021, adding further weight to the argument for monetary easing,” says Kim.
The next RBA meeting to discuss potential lowering of interest rates takes place on 17 and 18 February. The meeting after that is scheduled for the end of March. No indication has been given by the RBA whether rates will be cut in the February meeting, and before today’s news it was considered unlikely that a rate cut was imminent.
“Market sentiment is responding, with money markets now pricing in nearly a 90% chance of a February rate cut.”
Saxo Asia Pacific trader Junvum Kim
In December, RBA Governor Michele Bullock said the board was taking a cautious approach to lowering rates.
“Recent economic data have been mixed, some indicate softening in line with our forecasts. On balance some data are a little softer than expected this has given the board some confidence that inflationary pressures are declining but risks remain. The board judges that monetary policy remains restrictive and is working as anticipated,” Bullock said in a public address.
This week’s ABS data is a further sign of positive progress in the fight against inflation.
“December quarter’s rise was the same as the 0.2 per cent increase in the September 2024 quarter,” says Michelle Marquardt, the head of price statistics at the ABS. “These rises were the lowest recorded since the June 2020 quarter when the CPI fell during the COVID-19 outbreak when childcare was free,” says Marquardt.
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