November 27th 2024.
The latest data from the Australian Bureau of Statistics has revealed that headline inflation has remained at its lowest level in over three years. However, despite this seemingly positive news, the underlying figure is still not quite within the Reserve Bank's desired target range.
In October, the consumer price index remained steady at 2.1 per cent, the same as the previous month of September. This was lower than what experts had predicted, and also lower than the 2.7 per cent recorded in August. In fact, this is the lowest level of inflation since July 2021. It seems that energy rebates and a decline in fuel prices have once again played a significant role in keeping headline inflation towards the lower end of the RBA's target range.
However, when looking at the key measure of underlying inflation, known as the trimmed mean, there was a slight increase to 3.5 per cent. This is still above the RBA's target range of 2 to 3 per cent. The Australian Bureau of Statistics' head of prices statistics, Michelle Marquardt, noted that the drop in electricity and fuel prices had a significant impact on the annual CPI measure for this month.
She further explained that when there are large fluctuations in prices for certain items, other measures of underlying inflation, such as the CPI excluding volatile items and holiday travel, as well as the trimmed mean, can provide additional insights into the overall trend of inflation. The trimmed mean, in particular, saw an increase from 3.2 per cent in the previous month to 3.5 per cent, which is similar to what was recorded in August.
However, another measure of underlying inflation, the CPI excluding volatile items and holiday travel, saw a decrease to 2.4 per cent in the 12 months leading up to October. This is down from 2.7 per cent in September, according to Marquardt. With the trimmed mean rising to its highest level since July, it is highly unlikely that today's inflation data will lead the Reserve Bank to cut interest rates in their final meeting of the year, which is scheduled in two weeks' time.
Typically, the RBA places more importance on the quarterly figures, and the next update is not expected until late January. This means that any potential changes to interest rates will not be made until then. With the trimmed mean rising and the CPI excluding volatile items and holiday travel dropping, it seems that the Reserve Bank will take a cautious approach and closely monitor the situation before making any significant decisions.
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