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Annual inflation is heading in the right direction as the latest Australian Bureau of Statistics (ABS) data shows it fell from 3.6% in the September 2024 quarter to 3.2% in the December quarter.
This brings inflation to its lowest point since March 2022.
While this is still above the Reserve Bank of Australia’s (RBA’s) target range of 2-3%, the news has increased expectations that the central bank will cut the official cash rate sooner rather than later.
For example, in the lead-up to these inflation figures, ANZ and Commonwealth Bank predicted a February rate cut, while NAB and Westpac anticipated the first cut would come in May. Since the latest data was released, Westpac has revised its forecast, predicting the first cut will come in February.
The RBA meets in the middle of February to decide its next move. A cut will be the first change in the cash rate in more than a year since the RBA’s last rate hike in November 2023.
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