RBA interest rates: Core inflation back into target band for first time since 2021

West Australian

30-04-2025

New consumer price data will give the Reserve Bank room to move on interest rates, with core inflation returning to the target range for the first time since 2021.
Core inflation — also known as trimmed mean as it removes volatile items — was 2.9 per cent for the 12 months to March, according to Australian Bureau of Statistics data released on Wednesday.
'Trimmed mean annual inflation was 2.9 per cent in the March quarter, down from 3.3 per cent in the December quarter. This is the lowest annual trimmed mean inflation rate since the December 2021 quarter,' the ABS said.
The central bank wants to be confident prices are coming under control so it can turn focus to US President Donald Trump's trade chaos if necessary.
Headline inflation — which gives the full picture of the impact on Aussie wallets — was 2.4 per cent. But there was a clear rebound in pressure. For the March quarter, prices rose 0.9 per cent.
The numbers don't yet show the impact of the trade war but are the fullest measurement of inflation so far this year as the data includes all items tracked by the bureau.
Big banks Westpac and Commonwealth had tipped core inflation would return to target and backed an interest rate cut when the Reserve Bank meets in mid-May.
Westpac's Luci Ellis reckoned borrowers could 'lock in' a rate reduction.
'Even though we do not expect the US administration to implement tariffs at the rates originally announced, some damage has already been done,' she said in a recent note.
'Global growth — and especially US growth — will be slower; the response of China will be disinflationary for the world outside the US; and uncertainty is likely to delay decisions on some investment projects.
'For this reason, we lock in our view that the (RBA) board will cut the cash rate by 25 points to 3.85 per cent on 20 May.
'Holding rates steady in the face of the global turmoil and softer momentum in the labour market — for the sake of (a slight fall of) inflation – would be very hard to explain.'
Financial markets overnight also considered a rate cut likely.
The inflation news comes after analysts from S&P Global said Australia's AAA credit rating would be at risk from the bipartisan post-pandemic spending spree and Federal election cash splash.
That would drive up interest rates on government debt and for bank lending, including mortgages.
Government spending spiked during COVID-19 and a range of big long-term commitments meant it never returned back to the levels seen before the pandemic.
That trend — and emergency low interest rates — drove inflation to the highest level in decades, peaking through 2022.