Speculation of an early interest rate cut in Australia increased after underlying inflation eased in November.
Although the consumer price index (CPI) indicator rose to 2.3% in the 12 months to November 2024 from 2.1% in the year ended October, annual trimmed mean inflation slipped to 3.2% from 3.5%, the Australian Bureau of Statistics (ABS) said.
The Reserve Bank of Australia (RBA) is closely watching underlying inflation, as measured by the annual trimmed mean, as it considers whether to cut official interest rates from the current level of 4.35% at its board meeting in February.
Many economists are expecting the central bank to move next month in what is the start of an election year in Australia.
The RBA has increased official rates 12 times from a COVID-19 pandemic low of 0.1% since May 2020 to push inflation down to its target level band 2-3% over the medium term.
The ABS said the largest contributors to the rise in the (CPI) indicator were food and non-alcoholic beverages (+2.9%), alcohol and tobacco (+6.7%) and recreation and culture (+3.2%), which were partly offset by electricity (-21.5%) and automotive fuel (-10.2%).
ABS Head of Prices Statistics Michelle Marquardt said annual CPI inflation had risen partly due to the timing of electricity rebates, with households in some states and territories receiving two rebate payments in October in lieu of none in in July.
“From November most households received one payment. As a result, electricity prices fell 21.5% in the 12 months to November, compared to a fall of 35.6% to October,” Marquardt said in a said in a statement.
However, measures of underlying inflation such as annual trimmed mean inflation, which fell to 3.2% from 3.5%, can give more insights into how inflation is trending when prices for some items change significantly.
Another underlying inflation measure was the CPI excluding volatile items and holiday travel, which rose 2.8% in the 12 months to November compared to a 2.4% rise in the 12 months to October, primarily because of the changes in electricity prices.