AUS
NZ
UK
CA
USA
IND
Highlights
- Australia's inflation rate cools, landing below expectations in Q3.
- Reserve Bank of Australia (RBA) closely monitors as inflation impacts policy decisions.
- Rate cuts now anticipated in 2025, with a potential February shift.
Australia’s inflation saw a notable slowdown in the third quarter of the year, with the Consumer Price Index (CPI) rising by just 0.2 percent between July and September. This marks a decrease from the 1 percent increase seen in the June quarter, reflecting a gradual decline in inflation pressures. According to the Australian Bureau of Statistics (ABS), the annual CPI eased to 2.8 percent, a reduction from the previous 3.8 percent reported for the 12 months leading up to the end of June.
The quarterly data has fallen slightly below market forecasts, as analysts expected CPI growth to taper to 0.3 percent for the period, and the year-on-year CPI figure to drop to 2.9 percent. This lower-than-expected inflation data reflects a softening in price pressures across various sectors and could shape the Reserve Bank of Australia’s (RBA) approach to upcoming monetary policy adjustments.
Core inflation, which the RBA considers its key inflationary measure, also reflected a slowing pace. The data showed a rise of 0.8 percent for the third quarter, meeting the RBA’s target range and aligning closely with analyst predictions of 0.7 percent. Over the past year, core inflation has moderated to 3.5 percent, a drop from the revised 4 percent in the prior quarter, in line with expectations.
The inflation data comes at a critical time, as the RBA prepares for its next policy meeting. While recent economic indicators show cooling inflation, employment figures have also displayed unexpected resilience, which has caused shifts in market expectations regarding the RBA’s rate decisions. The latest job report was stronger than anticipated, pushing potential expectations for a rate cut further out, with many now predicting 2025 as a more likely period for adjustments. However, a 50 percent probability remains for a rate cut as early as February, while others anticipate it could be postponed.
As inflation moderates and the labor market remains robust, the RBA will weigh these factors in its upcoming policy discussions. The bank’s considerations reflect ongoing efforts to balance inflation control with economic growth, as the third-quarter data provides insight into Australia's current economic landscape.
