The odds of an interest rate cut next month have increased, with official figures showing the Reserve Bank of Australia’s (RBA) preferred measure of inflation fell to 3.2 per cent over the year to December.
Economists were typically expecting the annual trimmed mean to come in at 3.3 per cent with prices rising 0.6 per cent in the December quarter.
The more volatile headline inflation figure came in at 0.2 per cent for the December quarter and 2.4 per cent for the year, down from a peak of 7.8 per cent two years ago.
The Reserve Bank has emphasised that “sustainably” returning inflation to its 2-3 per cent target range within a “reasonable” time frame is its top priority, making today’s figures crucial to the prospects of an interest rate cut.
Ahead of the data release, financial markets were pricing in a nearly 80 per cent chance of a 25 basis point cut at the next RBA meeting, according to Bloomberg, and the odds increased after the release, while the Australian dollar fell.
The central bank next meets in mid-February and will deliver its interest rates decision on Tuesday, February 18.
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