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Monthly inflation ticking along - in the wrong direction

Monthly inflation ticking along - in the wrong direction

29 May, 2024 - 4 min read

The prospect of cash rate cuts in 2024 remains in doubt following higher than expected inflation figures released from the ABS.

The monthly CPI indicator shows annual inflation in April ticked up for the second month in a row and is now sitting at 3.6 per cent, the highest annual rate since November of last year.

However, looking at the annual rate, excluding volatile items and holiday travel, the monthly indicator held steady from the previous month at 4.1 per cent.

Monthly CPI indicator: ABS

Monthly CPI Indicator, ABS

Source: ABS monthly CPI indicator

Monthly Consumer Price Index Indicator, Australia - annual movement since peak

	Monthly CPI	Ex. volatile items + holiday
Dec-22	8.4%	7.2%
Jan-23	7.5%	6.9%
Feb-23	6.8%	6.8%
Mar-23	6.3%	6.9%
Apr-23	6.7%	6.5%
May-23	5.5%	6.4%
Jun-23	5.4%	6.1%
Jul-23	4.9%	5.8%
Aug-23	5.2%	5.5%
Sep-23	5.6%	5.5%
Oct-23	4.9%	5.1%
Nov-23	4.3%	4.8%
Dec-23	3.4%	4.2%
Jan-24	3.4%	4.1%
Feb-24	3.4%	3.9%
Mar-24	3.5%	4.1%
April 24	3.6%	4.1%

Source: ABS Consumer Price Index indicator

Big four bank forecasts remain unchanged

All four big bank economic teams have kept their forecasts the same on the back of today’s monthly ABS data, with each team expecting the first RBA cut to come in November. That said, ANZ has again acknowledged it could be later.

Current big four bank cash rate forecasts

	June RBA meeting	Forecasted next RBA move	Total 0.25%-pt cuts in 2024	Total 0.25%-pt cuts in 2025
CBA	Hold at 4.35%	- 0.25% pts in Nov-24	1	4
Westpac	Hold at 4.35%	- 0.25% pts in Nov-24	1	4
NAB	Hold at 4.35%	- 0.25% pts in Nov-24	1	4
ANZ	Hold at 4.35%	- 0.25% pts in Nov-24	1	2

Source: RateCity.com.au. Forecasts current as of 29/05/2024

RateCity.com.au research director, Sally Tindall, said: “The RBA isn’t going to hike rates on the back of this data, but it won’t be entertaining the prospect of rate cuts any time soon either.”

“The central bank is likely to be in a prolonged ‘wait-and-see’ period,” she said.

“While the RBA will not put excess weight on one month’s worth of data, looking back since the start of the year, Australia’s progress in the battle against high inflation has the wobbles.

“The RBA will need to see this swing right around before it’s going to formally entertain the possibility of cash rate cuts.

“If you’ve got a mortgage, understand your rate isn’t moving any time soon unless you do something about it.

“The launch of CBA’s new digital home loan, which is exclusive to refinancers, is fresh evidence banks are ready and willing to plate up lower rates if they can secure your business. Use this to your advantage.

“The stage three tax cuts coming in July will provide welcome relief to households squarely in the red, but if you’ve managed to balance the budget since the start of the hikes, consider putting that money in the mortgage.

“Not only will it build up your financial buffer, it can help reduce the pain of higher rates,” she said.

Cost of a $500,000 home loan for the remainder of the year - assuming no RBA rate changes

Based on principal & interest payments with 25 years remaining

Owner-occupier	Rate	Current monthly repayments	Interest bill - rest of year (June - Dec incl)	Difference to complacent borrower
Complacent borrower	7.11%	$3,569	$20,661
Average borrower	6.39%	$3,342	$18,561	-$2,100
Sharp borrower	5.99%	$3,218	$17,394	-$3,267

Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest with 25 years remaining. Does not include RBA rate changes or fees.

Lowest variable rates on RateCity.com.au

Lender	Advertised rate
Abal Bank	5.75%
G&C Mutual Bank	5.80%
Police Bank, Bank of Heritage Isle, Border Bank*	5.84%
Pacific Mortgage Group	5.89%
The Mutual Bank	5.89%

Source: RateCity.com.au. Notes: excludes introductory rates and green loans. * First home buyer special.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

Eden Radford

External Comms Lead

Eden Radford is the External Comms Lead for RateCity, bringing almost a decade of experience across the finance services and technology sectors. In prior years, Eden has worked with Lendi, Aussie, Xero, Qualcomm, Accenture, and Dyson, among others, while being a pillar of expertise for government clients and contracts, as well. Eden has a passion for improving financial literacy, data storytelling and helping people better understand the decisions they can make about their own finances.