- Headline inflation falls to 2.4 per cent – best since early 2021
Australian home borrowers can now expect a rate cut as early as next month with inflation now at the lowest level in almost four years.
Headline inflation fell to 2.4 per cent in the December quarter – marking the best consumer price index data since early 2021.
Underlying inflation, also known as the trimmed mean, eased to 3.2 per cent during the same period, putting it only marginally above the Reserve Bank’s 2 to 3 per cent target.
Saxo Asia Pacific’s senior sales trader Junvum Kim said a February rate cut was now likely.
‘This softer-than-expected inflation data could amplify expectations for a February RBA rate cut and bolster the Reserve Bank’s confidence in steering inflation back to its target within a reasonable timeframe,’ he said.
The Commonwealth Bank is expecting a February rate cut but the other Big Four banks are still forecasting a May easing, when an election is due.
The Reserve Bank focuses on this underlying, annual number that strips out volatile items like petrol and fruit, instead of the CPI which includes one-off factors like the federal government’s $300 electricity rebates.
Cheaper petrol at the end of last year saw transport costs fall by 1.5 per cent in 2024.
Australian home borrowers can now expect a rate cut as early as next month with inflation now at the lowest level in almost four years
But school fees are now the biggest drain on family budgets with education costs climbing by 6.5 per cent.
The official data was taken before the Australian dollar in January sunk to 61 cents for the first time since March 2020 during the start of Covid.
A weaker currency makes imports more expensive, which could delay a potential interest rate cut.
But the latest data was better than economists had been forecasting.
This means the Reserve Bank could potentially cut the cash rate from an existing 4.35 per cent level when it meets again on February 17 and 18.
more to come
