Australia reported weaker than expected price pressures for the last quarter of 2024, further stoking expectations that the Reserve Bank of Australia (RBA) could start easing soon.
The quarterly reading came in at 0.2% versus the 0.3% consensus, although the annual headline CPI ticked higher from 2.3% to 2.5% as expected. Still, the trimmed mean CPI or the RBA’s preferred inflation measure reflected cooling price pressures at 0.5% versus the previous 0.8% quarterly gain.
Key Takeaways:
- Electricity prices fell 9.9% in the quarter due to Energy Bill Relief Fund rebates
- Housing and transport costs both declined 0.7%
- Services inflation remained elevated but eased to 4.3% annually
- Non-discretionary inflation dropped to its lowest level since March 2021 at 1.8%
The trimmed mean CPI, which excludes volatile items and provides a clearer view of underlying inflation, suggested that core inflationary pressures are moderating but remain above the Reserve Bank of Australia’s target band.
Link to Australia’s Q4 2024 CPI Report
The government’s Energy Bill Relief Fund played a crucial role in containing inflation, with electricity prices falling 25.2% over the past 12 months. Without these rebates, electricity prices would have risen 0.2% in the December quarter.
Market Reaction
Australian Dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Chart by TradingView
The Australian dollar slipped sharply following the softer-than-expected inflation data, raking in immediate losses particularly versus CHF (-0.33%) and EUR (-0.29%) while limiting declines versus NZD (-0.14%) and JPY (-0.20%).
Still, AUD managed to move sideways after the initial selloff, as traders are likely holding out for upcoming top-tier market catalysts later in the day, including the highly-anticipated FOMC decision.
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