Australian Inflation May Drop, Influencing RBA's Upcoming Rate

Australian Inflation Expected to Drop, Influencing RBA’s Upcoming Rate Decision

By: Nfinity Financials0 comments

Australian inflation situation might be changing a lot soon. According to economists at major banks, it has been anticipated that it could go down to the most reduced level seen since December 2021. On April 24th, the Australian Bureau of Statistics (ABS) will announce its latest figures on consumer prices. For policymakers and economists, this news is important as it might indicate what actions would be taken by the Reserve Bank of Australia (RBA).

Economists are predicting that the Consumer Price Index (CPI) might increase by 0.8% compared to the previous quarter’s 0.6%. While this is an incremental gain, they believe the annual inflation rate could decline significantly to 3.5%. They say their prediction matches what the Reserve Bank of Australia (RBA) guessed in February, but it might be a bit higher than what the RBA expects when they only look at certain parts of the data. Still, because the RBA has been cautious lately with its policies, these experts don’t think they’ll raise interest rates in May. They call their prediction a “rounded down estimate” because there’s still one month of data missing, making things uncertain. But they’re sticking to their target of 3% inflation by the end of the year.

On the other hand, some economists are being more cautious. They think the Consumer Price Index (CPI) might go up by 0.7% compared to the previous quarter, and the yearly inflation rate might be 3.4%. They say they’ve adjusted their prediction slightly downwards because the CPI in February was lower than they thought it would be.

Some experts predict that underlying inflation, which looks at the long-term trend, might go up by 0.9% compared to the previous quarter. They think the yearly inflation rate could drop to 3.8%. They point out that things like rent, insurance, and other services are the main reasons for inflation going up this quarter. They also say that things need to get better before they think about cutting interest rates, which they think might happen around November.

Bottom Line

As we get closer to the release of the CPI data, everyone’s eager to see how it’ll affect the Reserve Bank of Australia’s (RBA) decision in its board meeting on May 6–7. These new numbers won’t just give us a clear picture of the economy but also could sway whether the RBA changes the official cash rate, which is super important for Australia’s money policies. With different forecasts floating around, it shows how tricky it is to predict what’s going to happen with the economy, especially with all the challenges we’re facing globally and at home.

For more insights on the market and what’s happening with Australia’s economy, check out our articles.

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