Commonwealth Bank of Australia were already foreecasting an RBA February rate cut. The CPI data published data have further convinced them of that call. But it’ll be a slow rate reduction path after that. In summAry from the bank’s note after the data:
- The headline CPI rose by 0.2%/qtr in Q4 24 and the annual rate stepped down to 2.4% (i.e. essentially atthe middle of theRBA’s target band).
- The policy-relevant trimmed mean CPI increased by 0.5%/qtr and the annual rate eased to 3.2%.
- The six-month annualised rate of underlying inflation dropped to 2.7%and is comfortably within the RBA’s target band.
- We believe today’s inflation report will see the RBA commence normalising the cash rate with a 25bp rate reduction at the February Board meeting.
- The pace of easing is likely to be gradual and we continue to expect one 25bp rate decrease each quarter in 2025 for an end year cash rate of 3.35% (broadly in line with the RBA’s assessment of the neutral cash rate)
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Data, and more, from earlier ICYMI:
- Australian Q4 2024 inflation headline 2.4% y/y (expected 2.5%)
- AUD/USD has dropped after the better than expected Q4 inflation data from Australia
- Australian inflation data: RBA rate cut expectations rise higher
- Australian Treasurer Chalmers says worst of inflation is past
- Westpac changes its forecast to a February Reserve Bank of Australia interest rate cut
AUD update, with bets on a February 18 cut rising to around 90%:
This article was written by Eamonn Sheridan at www.forexlive.com. Source