ADELAIDE: An important measure of Australian inflation slipped in November to edge closer to the central bank’s target band, suggesting that policymakers may have room to consider easing sooner than later.
The closely watched trimmed mean core measure, which smooths out volatile items and is the focus of the Reserve Bank of Australia (RBA) attention, slowed to 3.2% from 3.5% in the prior month, data from the Australian Bureau of Statistics (ABS) showed yesterday.
Headline inflation advanced to 2.3% from a year earlier, above economists’ median estimate for a 2.2% increase.
The overall print has been within the RBA’s 2% to 3% target for four months, in part moderated by government tax rebates.
“Annual consumer price index (CPI) inflation has risen since last month, in part due to the timing of electricity rebates,” said ABS prices statistics head Michelle Marquardt.
The currency and the yield on policy sensitive three-year government notes fell after the data while stocks swung to gains.
Money markets see a more than 60% chance of a 25-basis-point reduction in the benchmark target rate in February from a 13-year high of 4.35%.
A reduction is fully priced in for April.
Economists also expect the RBA’s next move would be to ease rates though they are divided on the timing given the sticky core inflation and an uncertain global backdrop.
A complete suite of price data for the December quarter will be released later this month which will be an important input for the RBA’s Feb 17 to18 meeting.
The RBA has kept rates unchanged since November 2023, and has been highlighting that aggregate demand still exceeds the economy’s supply capacity.
Minutes of the December meeting showed the central bank is more confident that inflation is moving sustainably toward target but it’s still too soon to conclude the battle is won.
Members noted that additional information on jobs and inflation would be available by the February meeting. — Bloomberg
