Consumer price index holds steady, signals further rate cuts possible
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Australia’s inflation rate remained stable in the year to January 2025, reinforcing market expectations of additional interest rate cuts this year.
The Consumer Price Index (CPI) rose 2.5 per cent in the twelve months to January 2025, matching the increase recorded for the year to December 2024, according to Australian Bureau of Statistics data.
Core inflation measures showed mixed movements, with some metrics edging higher.
“The annual movement for the monthly CPI excluding the volatile items of fruit and vegetables, automotive fuel and holiday travel and accommodation, rose 2.9 per cent in January, up from the December figure of 2.7 per cent and 2.8 per cent for November,” said Real Estate Institute of Australia (REIA) President, Leanne Pilkington.
The trimmed mean inflation, closely watched by the Reserve Bank, increased marginally.
“The important analytical series of annual trimmed mean inflation went up by 2.8 per cent in January, up from 2.7 per cent in December and down from 3.2 per cent in November,” Ms Pilkington said.
The latest figures align with market expectations and continue to move towards the RBA’s target range of 2-3 per cent.
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Experts caution that the monthly indicator covers only about two-thirds of the consumer price index basket, making some volatility inevitable.
Housing, food and beverages, and alcohol and tobacco recorded the most significant price increases at the group level.
Rental costs showed signs of easing pressure, with the annual increase dropping to its lowest level in nearly two years.
“Rents increased by 5.8 per cent in the twelve months to January, down from a 6.2 per cent rise December, and the lowest twelve month increase since April 2023, reflecting increased vacancy rates across most capital cities,” Ms Pilkington said.
The generally favourable inflation trend supports financial market predictions for further monetary policy easing.
“The consistent downward trend in the figures support market expectations of further rate cuts during 2025 which would provide additional relief for borrowers following the cut this month,” Ms Pilkington said.