The unexpected jump in core inflation to 3% – from 2.7% – makes is it very difficult for the RBA to cut rates any further this year – despite the recent uptick in unemployment, Bendigo Bank Chief Economist, David Robertson said today.
“A Cup Day cut is now at best around a 1 in 12 chance, having been an odds-on favourite a few days ago,” Mr Robertson said.
“This will leave the official cash rate at 3.6% still clearly above a ‘neutral rate’, so another cut early to mid-next year is still likely especially if labour markets continue to ease.”
The rise in inflation was evident in electricity prices, new dwelling costs and market services, but underlying inflation may still ease back below 3% in the next few month’s data.
Mr Roberston said the next cash rate cut is now unlikely to occur in 2025.
“Our revised forecasts still have one more RBA cut, but now not until February 2026,” Mr Roberston said.
“Our forecasts for a stronger Aussie Dollar and slightly higher GDP growth in 2026 are unchanged.”
Mr Robertson noted the next inflation data will be released on November 26 (for October), which will be the first ‘complete monthly CPI’. This comprehensive inflation data will be the new primary measure of CPI, instead of needing to wait for quarterly numbers.
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