Asia-Pacific

Australia’s Lower July Inflation Strengthens Case for RBA Interest Rate Pause

AuthorFlavie Du

Reading Time1 min

PublishedAugust 31, 2023

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Headline

Context

Data released on Wednesday revealed Australia’s July inflation rate falling below expectations, reflecting a global trend. This development supports the Reserve Bank of Australia (RBA) in maintaining its current interest rate policy at its meeting next week. Figures from the Australian Bureau of Statistics indicate that the Consumer Price Index (CPI) rose by 4.9% year-on-year in July, below economists’ projected 5.2% increase. This marks the third consecutive month of decreasing inflation. The RBA had previously anticipated reaching a 2-3% inflation target by the end of 2025.

Evidence

Pending intelligence enrichment.

Analysis

Excluding volatile components, Australia’s core CPI increase for July was 5.8%, down from June’s 6.1%. The moderation in consumer price growth is attributed to government subsidies offsetting the rise in energy costs. Michelle Marquardt, Head of Prices Statistics at the Australian Bureau of Statistics, noted: “If we exclude the impact of rebates from the data for July 2023, electricity prices would have shown a monthly increase of 19.2%.” After twelve consecutive interest rate hikes, the Reserve Bank of Australia decided to pause this month to assess the effects of its tightening policies.