Inflation Indicator in Australia Supports Lower Interest Rates

Forex - Australia's inflation indicator rose slightly in November, but remained at the lower end of the Reserve Bank of Australia's (RBA) target range, keeping hopes alive that interest rates could start to decline as early as February.
According to data released by the Australian Bureau of Statistics (ABS), the consumer price index indicator increased by 2.3% in the 12 months up to November, higher than the 2.1% rise recorded in the 12 months up to October.
Economists had expected a year-on-year increase of 2.2% in November.
The data indicated that the annual average inflation stood at 3.2% in November, down from 3.5% in October.
This information came after comments suggesting that the RBA's confidence was increasing that inflation would soon return sustainably to its target range of 2 to 3%, paving the way for a cut in the official cash rate in the coming months.
Capital Economics economist Abhijit Surya stated, "It is unlikely that the RBA will pay much attention to the slight increase in headline inflation in November. In fact, with core price pressures showing significant signs of reduction, the risk of the Bank cutting rates sooner than we currently predict in May is rising. Core inflation measures indeed indicate that fundamental price pressures are seriously diminishing."
The ABS noted that the November result was partly expected due to the timing of government electricity rebates paid to households to offset rising electricity prices.
In some states and regions, households received two rebate payments in October instead of not receiving a payment in July. Most households began receiving a payment from November onward.
According to the ABS, electricity prices fell by 21.5% over the 12 months to November, compared to a 35.6% decrease in October. Automotive fuel prices were also 10.2% lower year-on-year.
In a statement, Finance Minister Jim Chalmers said, "Headline inflation has been below the Central Bank’s target range for three consecutive months for the first time since 2021. These new figures are an important reminder of the significant and sustainable progress we are making in the fight against inflation."