Australia: Inflation holds within target in January
Latest reading: Inflation held at December’s 2.5% in January, remaining at the mid-point of the 2.0–3.0% target band of the Reserve Bank of Australia (RBA) and falling slightly short of market expectations. Looking at the details of the release, transport prices rose at a softer clip, while those for food, housing and textiles gained traction.
Meanwhile, the trend was pointed down, with annual average inflation inching down to 3.0% in January from December’s 3.1%. December’s result marked the joint-lowest reading in three years. Conversely, the annual trimmed mean—a closely watched measure of core inflation by the RBA—ticked up to 2.8% in January from 2.7% in December; still, it remained within the Central Bank’s target range for the second consecutive month.
Lastly, consumer prices rose 0.56% in monthly terms in January, accelerating from December’s 0.16% increase.
Outlook: Our panel expects inflation to average around the mid-point of the RBA’s target band overall in 2025, cooling from 2024 levels due to lower oil prices, a looser labor market and tight monetary policy. Still, price pressures should pick up in H2 due to a fading high base of comparison and healthier domestic demand. Wage growth and reciprocal tariffs on U.S. goods are key risk factors.