Australian Consumer Price Index Inflation Hits Three-Year Low, Core Inflation Declines Less Than Expected
Investing.com-- Australian consumer price index inflation eased as anticipated in August, reaching a three-year low after government initiatives aimed at reducing high energy costs, while decreases in core inflation were not as significant.
The CPI grew by 2.7% year-on-year, according to data from the Australian Bureau of Statistics released on Wednesday, meeting expectations and decreasing sharply from the 3.5% recorded in the previous month.
Core inflation, which excludes volatile items like fuel, fresh food, and holiday spending, dropped to 3% in August from 3.7% in the previous month. Annual trimmed mean inflation, which excludes more volatile items, decreased to 3.4% in August from 3.8% in July.
Headline inflation reached its lowest level since August 2021, falling within the Reserve Bank of Australia's target range of 2% to 3% annually.
The decrease in inflation for August was primarily driven by government initiatives to reduce high electricity and fuel costs.
Although CPI inflation fell within the RBA's target range, the central bank stated on Tuesday that this trend was expected to be temporary, with inflation projected to increase in the upcoming months. The RBA maintained its hawkish outlook and kept interest rates steady.
The RBA foresees CPI inflation reaching its target range consistently by 2026 and is likely to keep interest rates elevated until at least the first quarter of 2025.
Core CPI inflation readings stayed elevated and above the RBA's target range, but they also hit their lowest levels in 2-½ years.
Analysis:
The Australian Consumer Price Index inflation easing to a three-year low indicates a temporary decrease in inflation due to government measures to control high energy costs. While this may seem positive in the short term, the Reserve Bank of Australia expects inflation to pick up in the coming months. This could lead to potential changes in interest rates, impacting borrowing costs and overall economic conditions. It is essential for individuals and businesses to monitor these developments closely to make informed financial decisions.