Inflation has continued falling, bringing us one step closer to the day the Reserve Bank of Australia (RBA) begins cutting interest rates.
The Australian Bureau of Statistics has two inflationary measures. On the monthly measure, inflation fell from an annualised rate of 4.3% in November to 3.4% in December (see graph). On the quarterly measure – which is regarded as more accurate – inflation fell from 5.4% in the September quarter to 4.1% in the December quarter.
Both measures agree that inflation fell sharply during 2023 and is trending down.
The RBA aims to keep inflation within a target range of 2-3%. If the RBA believes inflation is on track to reach that range, it probably won’t need to make any further cash rate increases. And if it believes inflation is likely to fall below that range, it will start to think seriously about cutting the cash rate.
