CPI data paves way for RBA ‘hold’ on rates

Mike Taylor

Managing Editor and Publisher

1 February 2024

Market economists have taken comfort from the latest consumer price index (CPI) data revealing a 4.1% year on year increase prompting them to suggest the Reserve Bank has no need to lift interest rates.

However, none of the economists are suggesting that the Reserve Bank will be cutting rates any time soon.

The tone was set by HSBC said the CPI numbers provided even more evidence that a further rate hike was not on the cards “consistent with the view we have held for some time now”.

“However, rate cuts may still be some time away,” HSBC said. “Core inflation is still above th RBA’s 2-3% target band on a year on year, quarterly and six month annualised basis.

For its part, Barclays was a little more optimistic about rate cuts, suggesting that the RBA might pivot towards a rate cut by the third quarter of this year, somewhat earlier than the firm’s previous Q4 prediction.

State Street Global Markets head of APAC Macro Strategy, Dr Dwyfor Evans said the latest CPI data had revealed weaker than expected price pressures across the board, noting that the headline rate was below the RBA’s own 4/5% year on year estimate.

“This outcome seals the hiking cycle and should allow the RBA to lean more dovish at its upcoming policy meeting,” he said.