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Tags: Australia, CPI index, gasoline prices, inflation rate, RBA
On Wednesday, the Australian Bureau of Statistics reported that the consumer price index (CPI) rose by just 0.2% in the third quarter, slightly below the expected 0.3% increase. Annual inflation slowed to 2.8% from 3.8%, marking the first time since late 2021 that inflation has fallen within the Reserve Bank of Australia’s (RBA) target range of 2%-3%.
(Australia CPI YoY Q3 Data, Source: Investing.com)
This decline may have been influenced by government rebates on electricity and a reduction in gasoline prices, while a drop in core inflation has strengthened the potential case for a rate cut in the future. The RBA’s preferred core inflation measure, the trimmed mean, rose 0.8% for the quarter, slightly above forecasts of a 0.7% increase, bringing the annual pace down to 3.5% from 4.0%. However, inflation in the services sector remains elevated.
The RBA has kept rates steady since November, maintaining the cash rate at 4.35%, up from a pandemic-era low of 0.1%. The central bank considers this rate sufficiently restrictive to guide inflation back into its 2%-3% target range while supporting employment. Economic growth has slowed under the pressure of high interest rates, yet underlying inflation remains stubborn, with only gradual easing in the labor market. This has led markets to price in just a 26% chance of a rate cut by December.
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