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Fresh Inflation Figures Signal Imminent Rate Cut

admin928749
Jul 30
2 min read

New figures from the Australian Bureau of Statistics show headline inflation has slowed to just 2.1% over the past year to June — down from 2.4% in March, and now sitting at the very bottom of the Reserve Bank’s 2–3% target range.

Even more important? The trimmed mean — the RBA’s preferred measure of core inflation — also dipped, from 2.9% to 2.7%, pretty much right where economists thought it would land. While the RBA had expected 2.6%, this is still a strong sign inflation is cooling.

To put that into perspective, we haven’t seen headline inflation this low since March 2021, and the trimmed mean hasn’t been this lean since December 2021 — right in the middle of the COVID era.

So what does that mean for interest rates?

RBA Governor Michele Bullock recently said the bank chose to hold rates steady earlier this month because they were waiting on more data. Now that the June quarter numbers are in, economists are saying the RBA will likely cut interest rates at their next meeting on August 12.

“This is good news for all those millions of mortgage holders hoping for some rate relief,” said 9News Finance Editor Chris Kohler. “They were disappointed last time — but one of the biggest barriers to a rate cut has now been knocked down.”

Even before today’s inflation data was released, markets were pricing in an 88% chance of a rate cut in August. Now? That number is likely even higher.

Westpac’s Chief Economist Luci Ellis — who used to be an assistant governor at the RBA — says this update could even pave the way for more cuts next year.

“The RBA wanted confirmation that inflation is coming down and staying within target. That confirmation has now come,” she said.

Westpac is now predicting: