Analyzing key highlights of the Latest Inflation Data & the way ahead

The latest inflation data has been released by ABS ending June quarter, 2024.& exhibits a rise of 1% on a QoQ basis to 3.8%.

Now a lot of speculation has been brewing around inflation levels and RBA’s next steps to keep these in check preferably between the range of 2 to 3%.which was to be achieved by the end of 2025.

As per Jim Chalmers, headline inflation is precisely as per RBA’s forecast & hence since on an overall basis inflation levels are tracking the broader goals, it is unlikely that the central bank will go for another rate hike.

Most economists predict that although it is pretty early to announce a rate cut this year RBA will continue to maintain its position on cash rate at existing levels of 4.35% only. This is further substantiated by the fact that other than housing core inflation pressures were gradually subsiding.

Although on a QoQ basis, CPI levels kept rising and reached levels of 3.8% ending quarter of June - 2024 it is still low compared to 4.1% of the quarter ending December 2023. & hence economists have been predicting that the deflationary impacts of rate rise have begun to take effect and will sustainably reduce the CPI levels to the target set by the central bank. However, rising rates further might nudge the economy towards recession which would not be favorable for businesses and individuals alike.

Some Key Highlights from the CPI data released on Wednesday are as follows:

• Clothing and Footwear rose by 3.1%
• Alcohol & tobacco rose by 1.5%
• Housing showed an increase by 1.1%
• Rents rose to 7.3% in the last 1 Year
• Annual Food inflation dropped to 3.3 down from 3.8% in March Quarter & an all-time high levels of 9.2% in December 2022

Adequate and timely changes to commonwealth rent assistance program helped in sustaining rent level rise otherwise they might have risen by 9.1%

Although the broader goals of bringing inflation down are still tracking as per RBA’s timeline, if the central bank discovers substantial evidence that CPI levels need to be curbed then it may very well decide on hiking rates post meeting of the board in the coming week.

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