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New inflation data “almost certainly” rules out a Reserve Bank of Australia (RBA) cash rate cut when it meets next week, but a November cut is still a “live option”, experts say.
The consumer price index (CPI) — a measure of the percentage change in the price of various household goods and services — rose 3 per cent in the 12 months to August, according to Australian Bureau of Statistics (ABS) inflation data released today.
The biggest drivers of the price uptick were food and non-alcoholic beverages, which rose by 3 per cent, alcohol and tobacco by 6 per cent, and housing by 4.5 per cent.
The uptick in housing costs was primarily driven by electricity costs, which rose 24.6 per cent in the 12 months to August as government energy rebates ended and consumers faced higher out-of-pocket costs for electricity bills.
However, Marquardt said that, even if Commonwealth and state electricity rebates over the last year were excluded from the data, electricity prices rose by 5.9 per cent.
September rate cut highly unlikely
Sally Tindall, financial comparison site Canstar’s data insights director, said mortgage holders shouldn’t expect the RBA board to make any cash rate changes when it meets early next week.
“The chance of a rate cut next week was wafer-thin to start with, and this [new inflation data] really just almost certainly rules it out,” she said.
While one reason for this was “headline CPI moving in the wrong direction”, she highlighted that headline inflation isn’t the central consideration in RBA cash rate decisions.
The central bank treats the annual trimmed mean — a metric that smooths out certain volatile price movements — as a more reliable indicator of underlying inflation, and this figure decreased from 2.7 per cent in July to 2.6 in August.
“It’s slightly down from last month’s result, but still at 2.6 per cent, that’s above the RBA’s midpoint of the [2-3 per cent] target band. And so I really think that rules out the chance of a rate cut next week,” she added.
IG Market analyst Tony Sycamore said this movement in annual trimmed mean inflation was broadly in line with the central bank’s expectations.
The RBA’s updated forecasts in August projected that inflation would “fall back to the midpoint of that 2-3 per cent target band, and that’s exactly what it did at 2.6 per cent,” he said.
“I don’t think there were many people thinking they would cut rates in September, but absolutely not after today.”
November rate cut ‘on the cards’
Sycamore said the latest figures were a solid basis for the RBA “to continue its cautious rate-cutting cycle”.
“We expect the RBA to keep rates on hold in September, before cutting the cash rate by 25 basis points [0.25 percentage points] in November 2025, bringing it to 3.35 per cent,” he said.
“It’s not a rate cut that I would say is a 100 per cent guaranteed, but in terms of my conviction level, it is high … it’s probably a 70 per cent probability,” he added.
Tindall said a rate cut when the RBA board meets in early November was “a live option” but would depend on labour force data and quarterly CPI data that would be received between now and then.
“It is still very much on the cards in November,” she said.
“The RBA has said that further easing is likely — that’s code for at least one more cash rate cut [this year].
“However, it also says that it’s data-dependent, and it’s not a guarantee that there will be further cash rate cuts.”
The RBA board’s last monetary policy meeting for the year will be in December.
— with additional reporting from the Australian Associated Press.
