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Report
February rate cut more likely as core inflation drops
ABC NEWS (Australia)
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1/29/2025
The odds of an interest rate cut next month have increased with official figures showing the RBA’s preferred measure of inflation fell to 3.2% over the year to December.
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00:00
It was Melbourne Cup Day 2020, when Australians celebrated their last rate cut.
00:10
Today's decision reflects the Reserve Bank Board's commitment to do what we reasonably
00:14
can.
00:15
More than four years later, and bets are firming, the next one could be just weeks away.
00:21
It is good news, there are economists around the country saying cut baby cut.
00:25
Certainly the markets are telling it that it's time to cut.
00:29
Months after, the Reserve Bank's preferred measure of inflation fell to 3.2 per cent,
00:35
the lowest it's been in three years.
00:38
The RBA wants that number under three.
00:41
So is 3.2 enough for a cut?
00:44
This inflationary pressure that's less than they're anticipating means they don't need
00:49
to keep rates as tight as possible and we think there's a rate cut coming in February.
00:54
These numbers are better than expected and better than forecast.
00:58
What they show is we are making very meaningful, very substantial and now sustained progress
01:04
in the fight against inflation.
01:07
There was also progress on headline inflation, which includes more volatile price changes.
01:13
Prices for alcohol, tobacco, domestic flights and accommodation went up, while electricity
01:18
bills tumbled as households continued to receive government rebates.
01:24
Prices for fuel, new homes and fruit and vegetables also fell.
01:29
The drop in underlying inflation now puts considerable pressure on the Reserve Bank
01:34
to move on rates.
01:36
Financial markets are certainly excited about it, pricing in a more than 90 per cent chance
01:41
of rate relief in February.
01:44
A rate cut would be welcome news for restaurant owner Julie Tran.
01:48
She's not only got her own mortgage to worry about, but her customers too.
01:53
The last thing that they have money for is to spend money to go out for a dinner or lunch.
01:58
The most important thing here is to see some of the price pain that Australians have endured
02:04
now, that that continues to ease.
02:07
And the Treasurer will be hoping that continues, when the RBA next meets on February 18.
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