Australia’s consumer price inflation has maintained a two-year low in January, defying expectations of a slight increase, according to data released by the Australian Bureau of Statistics on Wednesday.
According to Reuters, the monthly consumer price index (CPI) revealed an annual pace of 3.4 per cent in January, consistent with December figures and below market predictions of 3.6 per cent.
The trimmed mean, a key indicator of core inflation, also witnessed a slight decrease, falling from 4.0 per cent in December to 3.8 per cent in January.
With inflation figures remaining subdued, market expectations lean towards the Reserve Bank of Australia (RBA) refraining from further interest rate hikes.
“Inflation excluding volatile items and holiday travel slowed to 4.1 per cent from 4.2 per cent,” noted the Australian Bureau of Statistics.
The data highlighted a monthly CPI decline of 0.3 per cent in January, driven by notable decreases in holiday travel, clothing, and petrol prices.
Holiday travel, in particular, witnessed a substantial slump of 5.2 per cent compared to the previous month.
These patterns indicate challenges in specific sectors and contribute to the overall stability of inflation at a lower rate, discouraging the need for immediate rate adjustments.
Despite the Reserve Bank of Australia’s previous efforts to combat rising inflation by increasing interest rates, the persistently low inflation figures indicate that further rate hikes may not be imminent.
The RBA, which has elevated interest rates by 425 basis points since May 2022, currently stands at a 12-year high of 4.35 per cent.
However, the central bank has not ruled out the possibility of additional hikes if necessary to align with its target inflation band of 2-3 per cent.
Financial markets, however, express confidence that the RBA is concluding its tightening phase, with swaps implying a 60 per cent chance of a first rate cut in August and an overall easing of 38 basis points by year-end.
As inflation remains subdued, the Australian dollar saw minimal change at $0.6547, reflecting the market’s steady stance.
Three-year bond futures also held at 96.26, indicating a cautious yet stable outlook.
(With inputs from Reuters)
