Commonwealth Bank of Australia still 'on alert' over prices despite declaring 'inflation dragon has been slayed'
Commonwealth Bank of Australia's head of Australian economics Gareth Aird has admitted the bank is still 'on alert' over prices despite declaring 'the proverbial inflation dragon has been slayed' on Friday.
Trimmed mean inflation – the middle 70 per cent of price changes core to the Reserve Bank of Australia's interest rates decision – fell within the central bank's 2-3 per cent target band in the March quarter for the first time since 2021.
Mr Aird said this will come as welcome news for the RBA as it looks to deliver mortgage holders their second dose of financial relief this year.
'It means that lingering upside inflation risks to the RBA's forecast did not materialise and that will give the Board more confidence that the inflation 'fight' is being won,' he said.
'Our view is that the proverbial inflation dragon has been slayed."
Despite this, Mr Aird later softened his stance, telling Sky News the major bank remained somewhat cautious about inflation.
'I guess we're on alert, but we look at the data, and if you look at last six months of inflation data, in terms of the quarterly numbers you had a 0.5 per cent increase on the trimmed mean and a 0.7 per cent (increase),' he said, referring to the December and March quarterly inflation respectively.
'So, if you take the six-month annualised rate - which is basically annualising those two numbers - you're at 2.5 per cent, which is smack bang in the middle of the RBA's (Reserve Bank of Australia) target band.'
He also touched on the strong wages data released during the week, which showed Aussies received an average pay rise of 3.4 per cent in the year to March.
This was above both the annual trimmed mean inflation rate (2.9 per cent) and headline rate (2.4 per cent).
'The wages data on Wednesday was a little bit firmer than we expected, but it was in line with what the RBA had forecast,' Mr Aird said.
'If you look at detail there, the strength in the wages number was really coming through some administered growth in terms of childcare and public sector.
'But if you look at the private side, those negotiating wages on an individual basis, you've seen quite a softening there.'
Mr Aird's comments come ahead of the RBA's cash rate call next week, with the chance of a 0.25 per cent rate cut very high.
The RBA held the cash rate at 4.35 per cent for more than a year as post-pandemic inflation slowly cooled.
That pause followed the RBA hiking rates 13 times from May 2022, over the period of about a year and a half, to stamp out soaring price pressures.
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