Anticipate a decrease in interest rates as underlying inflation aligns with RBA target range | Insights into the Australian economy

A rate cut by the Reserve Bank on May 20 seems to be certain as the latest data indicates that the key measure of underlying inflation has dropped below 3% for the first time in three years. The headline inflation, which includes government cost-of-living policies such as rebates, remained stable at 2.4% in the year to March, according to figures from the Australian Bureau of Statistics. The RBA’s preferred gauge of inflation, known as the trimmed mean rate, decreased from 3.3% in the year to December to 2.9% in March. Treasury Secretary Jim Chalmers stated that the current figures demonstrate the progress Australians have made in the economy. Looking towards the election on Saturday, Chalmers mentioned that there is a market expectation of four to five additional interest rate cuts this year, which, if they happen, could benefit Australians with mortgages. The RBA decreased rates in February, the first time in four years, and there is strong agreement among economists and investors that the central bank will lower the cash rate from 4.1% to 3.85% at its upcoming two-day meeting on May 19-20. The ABS reported a 3.2% annual increase in the cost of food and non-alcoholic beverages as a significant contributor to overall inflation, along with a 6.5% rise in alcohol and tobacco prices. Housing costs continue to be a major driver of inflation, with average rental costs increasing by 5.5% compared to the previous year.

Source: https://www.theguardian.com/business/2025/apr/30/cpi-underlying-inflation-figures-australia-rba-interest-rate-cut