Australia’s monthly inflation ticks up in January | Australian Markets

Mortgage holders hoping for back-to-back charge cuts have taken a hit.

The Australian Bureau of Statistics’ January inflation print reveals that trimmed imply inflation, which the Reserve Financial institution makes use of to measure Australia’s inflation charge, got here in at 2.8 per cent, up from 2.7 per cent in December.

Whereas Wednesday’s month-to-month CPI figures are solely a snapshot, it provides the RBA an indication of the place Australia’s inflation charge is heading, with a decrease quantity higher for a likelihood of a charge cut on April 1 when the board subsequent meets.

The headline inflation charge rose to 2.5 per cent within the 12 months till January 2025.

Tuesday’s announcement was according to economists’ expectations. CBA forecasts anticipated headline inflation to speed up to 2.7 per cent yr on yr and trimmed imply inflation to come back in at 2.8 per cent.

VanEck head of investment Russel Chesler mentioned one other charge cut within the short-term is unlikely.

“While market consensus has shifted towards an 80 per cent probability of the next cut being in May, we don’t see this happening until later in the year,” he mentioned.

“The recent rate cut doesn’t mean we have inflation under control – if anything, we’re going to be walking on eggshells for the rest of the year until we’ve had a solid run of lowered inflation.

According to Mr Chesler, with unemployment holding steady, robust retail sales and governments spending big in the lead up to an election, the data doesn’t support further cuts.

“We still have a very tight labour market, and there is a chance it could get hotter. Job ads increased in December 2024 and January 2025, according to the ANZ Job Ads report, and with the recent rate cut, employment opportunities could increase further off the back of increased business confidence in the stability of the economy,” Mr Chesler mentioned.

NED-9108-Month-to-month-Inflation-Indicator

Saxo chief investment officer Charu Chanana mentioned whereas right this moment’s figures don’t give us the complete image, they do offer a glimpse into the trail forward.

“The bigger picture remains one of inflation softening — which justifies the RBA’s decision this month to cut the cash rate by 25 basis points,” Ms Chanana mentioned.

Whereas total inflation rose there have been indicators the speed of ache for households was beginning to sluggish.

Hire inflation eased barely to five.8 per cent from 6.2 per cent, and new dwellings inflation eased to 2 per cent from 2.3 per cent, It’s the bottom annual rise in new dwelling costs since June 2021.

The ABS says the slowing in annual new dwellings inflation is off the back of bettering provide of supplies and labour in addition to low cost gives by companies to get Australian into the market.

Housing was nonetheless one of the most important contributors, up 2.1 per cent for the yr.

The opposite giant movers had been food and non-alcoholic drinks which is costing on average 3.3 per cent more than this time final yr and alcohol and tobacco which rose 6.4 per cent.

The increase in annual food inflation was primarily pushed by fruit, with costs 12.3 per cent larger in comparison with 12 months in the past.

Most of the increase in annual inflation for the housing group to January was brought on by will increase in electrical energy costs for some Queensland households as the federal government unwound non permanent assist within the kind of electrical energy rebates.

“Electricity rebates lower the price of electricity for households. The Queensland government introduced a one-off electricity rebate of $1,000 from July 2024. This rebate exceeded the average electricity bill for Queensland households. The impact of the rebates was lower in January than December as some households had exhausted the full value of the rebate.’ ABS head of prices statistics Michelle Marquardt said.

While not the full CPI and the first month of the quarter is “goods heavy”, it’s the primary inflation gauge for the reason that RBA cut began chopping charges final week.

Australia’s Money Price 2022

The RBA started its interest-rate-cutting cycle earlier this month, lopping 25 foundation factors off the money charge to scale back it to 4.10 per cent

This was the primary charge transfer since November 2023 and the primary charge cut in more than 4 years.

Nonetheless, governor Michele Bullock has warned under-the-pump Aussies will need to “be patient”, with the struggle in opposition to inflation removed from over.