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CPI data indicates stable inflation, hints at possible cessation of rate hikes


The latest Australian Bureau of Statistics (ABS) data reveals a stabilisation in the country’s Consumer Price Index (CPI), indicating possible halts to further interest rate increases. According to the data, the CPI saw a 3.4% rise in the twelve months leading to January 2024, mirroring the inflation rate from the prior month and showing a significant drop from the 4.3% recorded in November 2023. This stabilisation marks the lowest annual inflation rate since November 2021 and is a considerable decrease from the December 2022 peak of 8.4%.

Leanne Pilkington, President of the Real Estate Institute of Australia (REIA), highlighted, “Even though the January figure is the same as for the previous month the downward trend in inflation is undeniable, it is the lowest annual inflation since November 2021 and well down on the peak of 8.4% in December 2022.” She also noted the impact of the Reserve Bank of Australia’s (RBA) thirteen rate hikes since May 2022 on curbing inflation.

Contributing factors to the annual CPI increase in January included housing, food and non-alcoholic beverages, alcohol and tobacco, and insurance and financial services, with rents rising by 7.4% in the twelve months to January. Despite these increases, a notable trend is the rise in unemployment figures to 4.1% in January, up from 3.9% in December, marking the first time in two years the figure has surpassed 4%.

These economic signals, combined with comments from the Secretary to the Treasury earlier this month, suggest a cooling economic environment, potentially peaking service inflation. The Treasury’s remarks underscored the expectation of moderating service inflation as the economy cools.

Ms. Pilkington concluded by suggesting, “The pointers are that the RBA should keep the lid on further rate rises at its meeting in three weeks’ time and that home buyers can anticipate a rate reduction later this year.” This outlook hints at a strategic pause in rate hikes by the RBA, with potential benefits for home buyers in the forthcoming months.

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