The monthly Consumer Price Index (CPI) inflation indicator in Australia stood at 3.4% in the year to February 2024, unchanged from the previous two months. This was a touch below market expectations of 3.5%. The market reaction was largely unchanged.
Source: ABS
The latest reading pointed to the lowest level since November 2021, with food prices rising the least since January 2022 (3.6% versus the 4.4% reading in January 2022). Also, prices moderated for alcohol and tobacco (6.1% versus 6.7%) and communications (1.7% versus 2.0%) while declining for furnishings, household equipment & services (-0.3% versus 0.3%). Meanwhile, inflation was steady for housing (4.6%) and health (3.9%). On the other hand, prices accelerated for transport (3.4% versus 3.0%), education (5.1% versus 4.7%), and clothing and footwear (0.8% versus 0.4%), while those of recreation and culture rebounded (0.4% versus -1.7%).
The monthly CPI indicator excluding volatile items and travel advanced by 3.9% in February, down from a 4.1% rise in January. Inflation remains outside the Reserve Bank of Australia’s (RBA) target range of 2-3%. The RBA held the cash rate at 4.35% in March as it looks for signs that inflation is under control. Economists will be looking at the services component of the data which has proven resilient to higher rates.
Traders have trimmed their rate-cut bets in Australia and pushed out the first monetary easing to September after the latest jobs data revealed a much tighter labour market than expected, complicating the RBA’s battle against inflation. The monthly inflation figures are less comprehensive than the quarterly numbers but still an indication of how much 12-year high interest rates are squeezing demand in the economy.
RBA governor Michele Bullock last week said the central bank needed “greater confidence that inflation will return to the target band in a reasonable timeframe and will stay there” before it began to cut its cash rate.
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