Australia’s Slowing Inflation Raises Expectations for an Early Interest Rate Cut
One economist predicts that falling inflation may lead the RBA to cut rates in February as the annual rate approaches its 3.4 percent forecast.
Looking ahead to the 2025 New Year, economists anticipate an earlier-than-expected interest rate cut for Australian mortgage holders.
This prediction comes after the Australian Bureau of Statistics (ABS) released its latest data on Jan. 8, showing a decline in the annual “underlying” inflation rate from 3.5 percent in October to 3.2 percent in November.
Independent economist Saul Eslake suggests that if underlying inflation continues to decrease to 3.1 percent or even 3.0 percent in December, the annual rate for the December quarter could fall below the RBA’s forecast of 3.4 percent.
Eslake believes that the recent decline in underlying inflation, among other factors, might justify an interest rate cut at the RBA’s next review meeting scheduled for February.
Krishna Bhimavarapu, an economist at State Street Global Advisors APAC, shares a similar view, noting that “disinflation is progressing rapidly.”
Despite some economists’ optimistic forecasts, others are cautious about the persistent inflation in services and recommend that the RBA hold off on rate cuts until further evidence is available from the December quarter data.
Meanwhile, the RBA continues to focus on underlying inflation, with the trimmed mean inching closer to the target range, providing potential relief for borrowers.
