<
div>
Australia’s inflation rate has shown further signs of easing, a development that will likely provide boost to Labor as the country heads toward elections. This has also reignited hopes that another interest rate cut by the Reserve Bank of Australia may be on the horizon.
<p class="dcr-s3ycb2">The Consumer Price Index (CPI) figures for the 12 months to February indicate a slight decrease in the headline inflation rate, now standing at 2.4%.</p>
<p class="dcr-s3ycb2">Importantly, the Reserve Bank of Australia's preferred inflation measure, the "trimmed mean," which excludes volatile items and government subsidies, fell to 2.7%, down from 2.8%.</p>
<p class="dcr-s3ycb2">While the majority of economists do not foresee the RBA cutting rates at its imminent meeting, the reduction in February raises the possibility of an unexpected cut on 1 April – the last decision point before the election.</p>
<p class="dcr-s3ycb2">The prevailing expectation, however, is that a more likely time for a cash rate cut is in May, shortly after the election.</p>
<p class="dcr-s3ycb2">David Bassanese, chief economist at Betashares, believes the fresh CPI figures could pave the way for a cut in May, with his baseline prediction being for rates to be reduced in both May and August.</p>
<p class="dcr-s3ycb2">This drop in inflation presents a positive scenario for the Labor government, which is looking to counter competing cost-of-living agenda in the run-up to the election.</p>
<p class="dcr-s3ycb2">The CPI figures reveal a softening in rental price increases, prices for new homes, and declining electricity costs, the latter aided by government rebates.</p>
<p class="dcr-s3ycb2">Treasurer Jim Chalmers commented on Wednesday that the data reflects "more positive and promising developments" in the ongoing battle against inflation.</p>
<p class="dcr-s3ycb2">Chalmers stated that although monthly numbers can be volatile, the trend in inflation is clear. The government's budget papers suggest a "soft economic landing" rather than a harsh one, amid inflationary periods.</p>
<p class="dcr-s3ycb2">Traditionally, the RBA has been cautious in signaling potential interest rate cuts. While they have acknowledged the risks associated with taking rates too high for too long, central banks are equally concerned about cutting rates prematurely.</p>
<p class="dcr-s3ycb2">Internationally, the US tariff regime is seen to potentially impact global economic growth, which may pressure some central banks to lower rates to stimulate their economies.</p>
<p class="dcr-s3ycb2">AMP economist My Bui pointed out the need for the RBA to consider the implications of global trade issues, especially a potential trade war, on the Australian economy. Bui expects the
