With attention focused on the February release, Australia's January inflation reaches a two-year low

With attention focused on the February release, Australia's January inflation reaches a two-year low

As the second month of the quarter will provide additional data on services sector inflation, which has been dropping at a slower rate, the attention is on February releases to indicate the direction of the Reserve Bank of Australia's next measures. for many things.

Despite predictions for an increase in January, Australian consumer price inflation stayed at a two-year low, supporting the view that further interest rate rises are unlikely.

As the second month of the quarter will provide additional data on services sector inflation, which has been dropping at a slower rate, the attention is on February releases to indicate the direction of the Reserve Bank of Australia's next measures. for many things.

In New Zealand, rates stayed at 5.5% across the Tasman. The Reserve Bank of New Zealand revised down its dovish prediction for the future cash rate, indicating that it would tighten as well, from 5.7% to 5.6%.

According to statistics released by the Australian Bureau of Statistics on Wednesday, the country's monthly consumer price index (CPI) increased at an annual rate of 3.4% in January, which was lower than the 3.6% market estimate and remained steady from December.

The scaled-down average, a frequently monitored indicator of core inflation, increased by 3.8% annually in December after rising by 4.0% in December. With volatile items and leisure trips excluded, inflation decreased to 4.1% from 4.2%.

Chief economist at Challenger, Jonathan Kearns, said, "I think we wanted to be careful about interpreting too much into the one-month data, but there are nothing here that would represent good news for the RBA."

"The question essentially is what's happening with services inflation," he said.

There will be further pricing adjustments for a variety of services, such as haircuts and dining out, in the February statistics.

The statistics had little effect on the Australian dollar, which last traded at $0.6538, down 0.1%. Bond futures for three years were at 96.24.

The CPI decreased by 0.3% in January compared to December, mostly due to decreases in holiday travel, clothes and apparel, and fuel. Travel for pleasure decreased 5.2% from the previous month.

The government's relief strategy contributed to drive up power costs by a moderate 0.8%, while rents increased by 7.4% in January compared to the same month last year, remaining constant from December. This suggests that rent inflation has likely peaked. received assistance from.

Marcel Théliant, head of Capital Economics for Asia Pacific, said he was looking forward to the RBA's first rate decrease in August and that the January data " indicates that the RBA is likely to ease price pressures faster than expected." self-assured with the call.

"Barring any sudden shocks, it is increasingly likely that the CPI will be underneath both data bank estimates."

In order to bring inflation back to the bank's goal range of 2.2 percent, the Reserve Bank of Australia hiked interest rates by 425 basis points, making the top 12-year objective of 4.35% effective May 2022. Additional increases may be required. There's still a chance, however. 3%

The belief among financial markets is that the RBA has tightened. According to swaps, there is almost a 60% likelihood of a rate decrease in August and a 38 basis point reduction overall by year's end, essentially unchanged from earlier estimates.