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Australian Inflation: Strong Argument for Interest Rate Halt

Australian Inflation: Strong Argument for Interest Rate Halt

In October, Australian inflation gauge in a monthly rate interrupted two consecutive months of acceleration. Strengthening the case for the Reserve Bank to maintain its current interest rate pause in the upcoming week.

Data from the Australian Bureau of Statistics released on Wednesday revealed that the consumer price indicator increased by 4.9% from the preceding year. Marking the initial reading for the fourth quarter. This figure fell below economists’ projections of 5.2%.

RBA’s Recent Interest Rate Adjustment: Economic Resilience, Market Response

The Reserve Bank of Australia (RBA) recently raised interest rates this month due to persistent inflation. Also from a more resilient economy and labor market than initially anticipated. Currently standing at 4.35%, this marks a 12-year high for the cash rate.

Following the data release, the yield on the three-year bonds, sensitive to policy changes, decreased as traders adjusted their expectations. Reducing the likelihood of another RBA move in the coming year. Swaps now indicate approximately a 50% probability of a hike in 2024, down from the previous estimate of around 70%.

The report disclosed that when excluding volatile items, annual inflation moderated to 5.1% from the previous 5.5%.

Also Read: Australian Retail Sales Faced Strong Contractions

Analysts Assess RBA’s Policy Outlook Amid Australian Inflation Slowdown

Economic analysts have commented on the situation:

“The unexpectedly sharp deceleration in October’s inflation may signify the conclusion of the RBA’s cycle of rate hikes.”

“It is probable that the central bank will uphold a hawkish position in its upcoming meeting on December 5, aiming to consistently influence inflation expectations.”

This report coincides with inflation indicators in the US and the eurozone, which expected to reveal the smallest annual increases since early or mid-2021, reinforcing the belief that rates in those regions will remain unchanged.

Australian Inflation: RBA’s Policy Meeting and Robust Labor Market Amidst CPI Report Findings

This release represents one of the final significant pieces of data that RBA Governor Michele Bullock will review before the policy meeting on Tuesday, where the central bank’s board anticipated to retain current interest rates.

Australia’s labor market remains robust, with strong hiring and a jobless rate maintaining a range of 3.4% to 3.7% since June of the previous year, providing support to spending and prices.

Additional insights from today’s quarterly Consumer Price Index (CPI) report include:

The primary contributors to inflation were housing, registering a 6.1% increase, followed by food and non-alcoholic beverages, which rose by 5.3%, and transport, experiencing a 5.9% uptick.
Automotive fuel prices, while still elevated at 8.6%, exhibited a slowdown from the 19.7% surge observed in September.

For more information about CPI please read: What is the Consumer Price Index (CPI)?


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