Inflation read sours back-to-back rate cuts

Aussies hoping for back-to-back rate cuts have received unwelcome news after the inflation figures for April were released.

Hopes of back-to-back rate cuts slid on Wednesday after inflation data came in higher than the previous month despite April usually being a month for price hikes.

The Australian Bureau of Statistics’ April inflation print shows the all-important trimmed mean inflation, which the Reserve Bank uses to measure Australia’s inflation rate, came in hotter than expected.

CPI excluding volatile items and holiday travel rose 2.8 per cent in the 12 months to April compared with a 2.6 per cent rise in the 12 months to March.

Australia’s overall CPI indicator – including volatile items – came in at 2.4 per cent but again was higher than market forecasts of 2.3 per cent year-on-year.

Betashare chief economist David Bassanese said Wednesday’s inflation reading was only “mildly disappointing” but ruled out a July rate cut.

“With concerns over US tariff policy easing in recent weeks, and the all-important June quarter CPI report due in late July, it was always more likely that the RBA would hold off cutting interest rates until August – barring an economic emergency,” he said.

High rental prices added to Australia’s inflation rate. Picture: NewsWire / Andrew Henshaw

The Reserve Bank of Australia started its rate-cutting cycle in February before pausing in April and reducing rates again in May.

The cash rate has gone from 4.35 per cent at the start of the year to 3.85 per cent.

Mr Bassanese said he expected the RBA to continue its rate-cutting cycle, but follow the quarterly data, which is the pattern set so far by the central bank.

“Given easing housing and labour cost pressures, I still anticipate further declines in underlying inflation such that the RBA is still likely to cut rates at least twice further this year – albeit not as early as July,” he said.

“My base case remains that the RBA will cut rates in August and November, directly following the next two quarterly CPI reports – assuming these reports confirm an easing in annual underlying inflation to the midpoint of the RBA’s 2-3 per cent target band.”

The largest contributor was food and non-alcoholic beverages, housing and recreation and culture, during the busy Easter and Anzac Day weekends.

While annual food inflation eased in most categories, a spike in the price of eggs, which were up 18.6 per cent in the past 12-months due to bird flu outbreaks impacting supply, helped drive the category as a whole higher.

Meanwhile housing inflation continued its up tick coming in at 2.2 per cent for the month of April up from 1.8 per cent in March.

Rents rose 5.0 per cent in the 12 months to April following a 5.2 per cent rise in the 12 months to March.

Despite the jump in rental costs, it is the lowest annual growth in rental prices since February 2023, consistent with rising vacancy rates across most capital cities.

Electricity prices fell 6.5 per cent in the year to April, easing from a 9.6 per cent drop in March, as government rebates continued to help lower household costs.

Originally published as Inflation read sours back-to-back rate cuts