Core Inflation Hits Multi-Year Low, Raising Hopes for Rate Cut

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For the first time in more than three years, core inflation in Australia has finally slipped back into the Reserve Bank's target range — and that’s big news for your wallet.

The latest figures from the Australian Bureau of Statistics show that while headline inflation stayed steady at 2.4% in the March quarter, the trimmed mean — which is the RBA’s go-to measure of core inflation — dropped to 2.9%. That puts it back inside the central bank’s 2–3% target band, and it's the lowest it’s been since December 2021.

So, what does this actually mean for you?

Well, it likely paves the way for interest rate cuts, with experts saying we could be on track for several before the end of the year.

“That really does mean that the stage is now set for interest rate cuts, probably more than one,” said finance editor Chris Kohler. “The market is fully expecting a cut when the RBA meets on May 20.”

Even before this morning’s inflation report, the market had priced in up to four rate cuts this year — and nothing in today’s data seems to challenge that.

eToro market analyst Josh Gilbert agrees the inflation figures, while slightly hotter than expected, won’t stop the RBA from making its move.

“Trimmed CPI year-over-year rose 2.9 per cent — that’s inside the RBA’s target for the first time in three years. It's good news. But don’t expect RBA Governor Michele Bullock to come out and say the job is done,” he said.

He added that despite global uncertainties and softening growth outlooks, things are heading in the right direction for rate relief.

Still, it’s not all smooth sailing just yet. There’s retail sales data due Friday, and a federal election this weekend, both of which could shift the outlook slightly — or at least give the RBA more to think about.

And as the election campaign heats up, expect to hear a lot more about these inflation numbers.

“It’s a fair chance that the government is going to be using these figures to say the war on inflation is being won — and that rate cuts are coming,” said Kohler.

Treasurer Jim Chalmers wasted no time in jumping on the news, calling the drop in core inflation a “powerful demonstration” of the government’s economic management.

“Underlying inflation is now at its lowest level in three years. This is proof of the responsible economic management that’s been a defining feature of this Albanese Labor government,” Chalmers said.

All eyes now turn to May 20, when the Reserve Bank will decide whether to pull the trigger on the first rate cut of the year.

Want a quick explainer on how rate cuts actually affect your mortgage or savings?

More updates to come on AusNewsLanka.