📈Inflation results (March Quarter) - May 2025 📈

On the 30th of April, the ABS announced that inflation in the March 2025 quarter rose by 0.9%, bringing annual CPI to 2.4%. This keeps headline inflation within the Reserve Bank of Australia’s 2–3% target band. Underlying inflation, measured by the trimmed mean, declined to 2.9%, its first measure within the band since Q3 2021. While this may indicate diminishing inflationary momentum, especially in domestic services, quarterly inflation th has reaccelerated from 0.2% in December.

Sectoral data highlights persistent pressures. Housing costs rose 1.7% in the quarter, with rents and utilities driving the increase. Education surged by 5.2% due to tertiary fee adjustments, while food prices rose 1.2%. These categories suggest non-discretionary inflation remains elevated, with negative implications for lower-income households.

The RBA is likely to interpret the fall in core inflation as a signal that restrictive monetary policy is working. Markets have responded accordingly, pricing in a 25-basis point cut as early as the May 20 meeting. However, with electricity rebates rolling off and wage pressures remaining steady, upside risks to inflation persist.

With economic growth remaining weak at 1.3% and unemployment increasing, the RBA must balance inflation control with the risk of overtightening. Although underlying inflation is now within target, its durability remains uncertain, particularly in the face of persistent expansionary fiscal policy and global trade volatility.

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Image source: ABC News