Bets on a February RBA rate cut are solidfying after the inflation data earlier

Commonwealth Bank of Australia were already foreecasting an RBA February rate cut. The CPI data published data have further convinced them of that call. But it’ll be a slow rate reduction path after that. In summAry from the bank’s note after the data:

• The headline CPI rose by 0.2%/qtr in Q4 24 and the annual rate stepped down to 2.4% (i.e. essentially atthe middle of theRBA’s target band).
• The policy-relevant trimmed mean CPI increased by 0.5%/qtr and the annual rate eased to 3.2%.
• The six-month annualised rate of underlying inflation dropped to 2.7%and is comfortably within the RBA’s target band.
• We believe today’s inflation report will see the RBA commence normalising the cash rate with a 25bp rate reduction at the February Board meeting.
• The pace of easing is likely to be gradual and we continue to expect one 25bp rate decrease each quarter in 2025 for an end year cash rate of 3.35% (broadly in line with the RBA’s assessment of the neutral cash rate)

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Data, and more, from earlier ICYMI:

• Australian Q4 2024 inflation headline 2.4% y/y (expected 2.5%)
• AUD/USD has dropped after the better than expected Q4 inflation data from Australia
• Australian inflation data: RBA rate cut expectations rise higher
• Australian Treasurer Chalmers says worst of inflation is past
• Westpac changes its forecast to a February Reserve Bank of Australia interest rate cut

AUD update, with bets on a February 18 cut rising to around 90%:

This article was written by Eamonn Sheridan at www.forexlive.com.