- Underlying inflation falls to 2.7 per cent
Aussie borrowers can expect a rate cut next month with inflation falling to a three-year low.
Underlying inflation in the June quarter fell to 2.7 per cent, putting it closer to the mid-point of the Reserve Bank’s two to three per cent target and increasing the chance of an August 12 rate cut.
The trimmed mean, the RBA’s preferred measure of underlying inflation, was at the lowest level since December 2021, following lockdowns in Sydney and Melbourne.
Headline inflation fell again to just 2.1 per cent, the lowest since March 2021.
Reserve Bank of Australia Governor Michele Bullock earlier this month said underlying inflation in the June quarter would have to fall and stay closer to the 2.5 per cent to warrant a rate cut next month.
That was after the RBA cash rate was left on hold at 3.85 per cent, surprising economists and financial markets.
‘We’re waiting to confirm whether inflation is still on track to sustainably reach 2.5 per cent,’ Ms Bullock said on July 8.
‘I do understand that and I do understand that households with mortgages are very keen to see interest rates decline because it helps them with their cash flow.
Aussie borrowers can expect a rate cut next month with inflation continuing to fall
Reserve Bank of Australia Governor Michele Bullock earlier this month said underlying inflation in the June quarter would have to fall and stay closer to the 2.5 per cent to warrant a rate cut
‘I’m very conscious of that. I’m also very conscious we don’t want to end up having to fight inflation again.
‘We’ve only had one quarter of underlying inflation just back in 2.9 per cent.
‘Underlying inflation at the moment gives us the best idea of the underlying inflation pulse, if you like, because the headline numbers are mixed up a bit by particularly energy rebates. So the underlying is the best read.’
In a sign falling immigration is helping to ease the rental crisis, housing costs rose by just two per cent in the year to June.
But services inflation is still an issue with education costs rising by 5.5 per cent as insurance and financial services costs went up by 3.1 per cent.
The Reserve Bank pays more attention to the comprehensive quarterly inflation data than the more volatile monthly indicator.
While the RBA left rates on hold in July, the futures market regards an August rate cut as a 95 per cent chance.
