Quick Bites | Good news for investors – CPI in Australia lower than expected

The consumer price index (CPI) released by the Australian Bureau of Statistics (ABS) this week slowed to 0.6% in the three months to end December from 1.2% in the September quarter – significantly lower than market consensus of 0.8%. Over the last 12 months, CPI fell to 4.1% from 5.4% previously. It makes the case for the Reserve Bank of Australia (RBA) to pivot from raising rates to thinking about when it might consider cutting rates, and that is good news for investors in share markets, in bonds and in property.

This goes some way towards confirming that Australia, like many other countries (especially the US), are reaching a position where central banks can cut rates as inflation peters out, faster than many had expected. Investors are welcoming the news, and that is why many stock markets are hitting new highs in recent days.

We expect the share market to react positively to the news, with stock prices up and bond yields down. The news is likely to see a weakening in the AUD.

Source: Trading Economics



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