Australia’s core inflation rate has unexpectedly dropped to 3.2 per cent for the December quarter, raising expectations for a possible interest rate cut next month. While economists predicted a rate of 3.3 per cent, the Reserve Bank had forecast 3.4 per cent. The Australian Bureau of Statistics revealed this decline, down from a revised 3.6 per cent in the previous quarter.
Commentators view this as favourable news for mortgage holders and small business owners. Headline inflation also fell to 2.4 per cent from 2.8 per cent, marking the lowest since March 2021, primarily due to lower housing and transport costs, along with government energy bill relief. Notably, electricity prices dropped by a significant 9.9 per cent in the quarter, aided by recent rebate initiatives.
Before the inflation figures were released, investors anticipated an 84 per cent chance of a rate cut by the Reserve Bank on February 18. Some economists suggest that while a cut is probable, it may lead to a cautious easing cycle due to the current cash rate remaining at a 13-year high of 4.35 per cent. The general disinflationary trend is clear, yet some analysts warn that the RBA may adopt a wait-and-see approach to ensure a sustained decline before making any significant adjustments to monetary policy.