February rate cut ‘on the table’ after core inflation cools: economists
ABS data showed CPI remained in the RBA’s target band while annual trimmed mean inflation fell to 3.2 per cent in November.
Economists believe a February rate cut is “on the table” at the RBA’s next meeting in February after the latest data showed headline inflation within the bank’s target band and core inflation cooling.
The consumer price index edged up 2.3 per cent in the 12 months to November, up from a 2.1 per cent rise in the 12 months to October, the Australian Bureau of Statistics said on Wednesday.
Annual trimmed mean inflation was 3.2 per cent in November, down from 3.5 per cent in October.
Head of prices statistics Michelle Marquardt said the slight increase in CPI inflation was “in part due to the timing of electricity rebates”.
“Electricity rebates lower the price of electricity for households. The impact of the rebates was lower in November than October due to the timing of payments … as a result, electricity prices rose 22.4 per cent in November,” she said.
RSM Australia economist Devika Shivadekar said headline inflation remained “subdued” while underlying measures like the trimmed mean “do hint at some remaining price pressures”.
“Despite short term upticks, gradual cooling in new dwelling prices and fuel costs seem to be providing some reassurance about longer-term inflation trends,” she said.
She said a rate cut “will most likely be on the table” at the RBA’s February meeting but quarterly CPI data, due at the end of the month, would also play a big role in the RBA’s decision making.
AMP deputy chief economist Diana Mousina said the data showed “good progress” in slowing services prices, especially for insurance, travel and takeaway and restaurant meals.
“While rents are still elevated, they look to have peaked,” she said. “There are now more items with inflation running below 2 per cent than there are items running above 3 per cent.”
If December quarter CPI data showed inflation continuing to ease, Mousina said, a February 0.25 per cent rate cut was “likely”.
The current cash rate has remained at a 12-year high of 4.35 per cent since November 2023.
Bendigo Bank chief economist David Robertson said the fact headline CPI remained in the RBA target band and underlying core inflation fell supported a rate cut in the first half of 2025.
However more evidence was needed for an early rate cut, he said.
“We continue to forecast three cuts this year although still expect the first to be in May, by which time we hope the RBA has enough evidence to reduce rates by 35 basis points to an even 4 per cent,” Robertson said.
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