Hopes of early rate cut in 2025 by Australia's central bank fade: KPMG

The latest monthly consumer price inflation (CPI) results reveal annual headline inflation of 2.1 per cent – below market expectations and continuing to hover around the lower bound of the RBA target range.

“There are a number of standouts in the data that suggest there is likely to be a stickiness in core inflation. In particular rents inflation remains elevated for the month at an annualised level of 6.7 per cent—which, given this component has the highest weighting of all the categories making up the inflation basket, means its influence is likely to be felt strongly for some time to come,” KPMG chief economist Brendan Rynne wrote on the company website.

Today’s inflation numbers are unlikely to cause a change in stance at the RBA with respect to when to start reducing Australia’s cash rate, he wrote.

“While there are still some arguments for easing the cash rate from February 2025—the most obvious being the weak state of the economy, with both business investment and household consumption low—it seems the continuation of high government spending, elevated population growth, limited increases in the stock of dwellings and tightness in the labour market (due to strong public sector employment), will all combine to see the first rate cut of 2025 pushed back to around mid-year,” Rynne added.

Fibre2Fashion News Desk (DS)