There has been limited market reaction as the January release is heavily weighted toward goods prices that have been falling faster than services, and thus suggest some scope for a downside surprise.
Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 3.4% in January, unchanged from December and under market forecasts of 3.6%.
A closely watched measure of core inflation, the trimmed mean, rose an annual 3.8%, down from 4.0% in December. Inflation excluding volatile items and holiday travel slowed to 4.1% from 4.2%.
For January alone, CPI fell 0.3% from the previous month, driven by declines in holiday travel, clothes and garments and petrol. Holiday travel slumped 5.2% from a month earlier.
The Reserve Bank of Australia has raised interest rates by 425 basis points since May 2022 to a 12-year top of 4.35%, and has not ruled out the risk of another hike if necessary to bring inflation back to the bank’s target band of 2-3%.
Financial markets are confident the RBA is done tightening. Swaps imply about a 60% chance of a first rate cut in August and a total easing of 38 basis points by the end of the year, little changed from before.
The Australian dollar was little changed at $0.6547, and three year bond futures held at 96.26.
Source: Economy - investing.com
