Australia: Inflation eases and surprises markets on the downside in February
Latest reading: Inflation eased to 2.4% in February from January’s 2.5%, edging below the midpoint 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 costs fell, and price pressures for food, housing and textiles cooled.
As a result, the trend pointed down, with annual average inflation inching down to 2.9% in February from January’s over three-year low of 3.0%. Moreover, the annual trimmed mean—a closely watched measure of core inflation by the RBA—ticked down to 2.7% in February from 2.8% in January and remained within the Central Bank’s target range for the third consecutive month.
Lastly, consumer prices rose 0.08% in monthly terms in February, decelerating from January’s 0.56% increase.
Outlook: Our panel sees price pressures trending down in Q2, tempered by lower oil prices, a looser labor market and still-elevated interest rates. Still, inflation should then pick up in H2, fanned by a fading high base of comparison and healthier domestic demand. Overall in 2025, our Consensus is for inflation to average within the RBA’s target band for the first time in four years and hover around its midpoint. Faster-than-expected wage growth and escalating global trade tensions are upside risks.