Inflation is now in the 2-3% band and anyone feeling the pressure of high interest rates must have breathed a sigh of relief, at least until they heard the ABC news report that said we might not see a rate cut in 2025! This was driven by an HSBC call, but this one is out of step with most economists. However, a journalist looking for a headline couldn’t resist running with that scary prediction.

For those worried that the ABC could be right, let me assure you that most economists have February marked in a the most likely time for a cut. The CPI numbers yesterday were a help in making that happen. That’s the fair call rather than the unfair alarmist call that we heard from HSBC and the ABC yesterday.

To be absolutely objective, there are a few economists thinking we might have to wait until May, but they are a minority.

This was the big news on inflation from the ABS:

1. The headline Consumer Price Index (CPI) rose by 0.2% in the September quarter of 2024 from the previous quarter, slightly below market expectations for a 0.3% increase.
2. It was the slowest quarterly pace of growth since the June quarter of 2020 – when prices dropped - at the height of the Covid-19 pandemic lockdowns.
3. The energy rebates helped bring inflation down.
4. Petrol prices fell by 6.7% in the September quarter and that helped lower inflation.
5. The RBA is more focused on core or underlying inflation, with the trimmed mean CPI measure increasing 0.8% in the third quarter, in line with forecasts. The annual pace slowed to a 2½-year low of 3.5% from 4% in the prior quarter.
6. The problem is not goods inflation, which was up only 1.4% for the year to September. It was services inflation, which was up 4.5%!

The CBA pointed out the following: “Higher prices for holiday travel and accommodation (up 1.4%); property rates (up 4.9%); rents (up 1.6%); other financial services (up 0.9%) and childcare (up 3.2%) were the main contributors to the lift in quarterly services inflation, which remains sticky.”

The economics team at our biggest bank was tipping a December cut but now has moved that to February. The economic growth numbers out on December 4 could be crucial. If it’s a weak number or even negative, a February cut from the RBA would become close to a certainty.

The drama of the data drops continues but the recent run of stats suggests we are closer to a cut than we have been for some time.

If there is no rate cut in 2025, the RBA boss should be shown the door!

The ABC reporter may have misinterpreted the HSBC story but that was the headline.