What will the inflation data mean for rates?
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What does the latest inflation data reveal about price trends in Australia?
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Fresh data out today shows prices are rising slower than they were earlier in the year, but the rate didn't fall as much as expected, and it's still well above the Reserve Bank's target. Does that mean the bank might be forced to hike rates even further? Meanwhile, Canada has loaded its tariff cannon to aim at its southern neighbor. Will it light the fuse? Welcome to ABC Business Daily. I'm Carrington Clark. And today I'm joined by a very special guest,
Diana Messina from AMP.
Thank you so much, Deanna, for joining us. I've been wanting to get you on the show. It's great to be able to do it on Inflation Day. You haven't had a huge amount of time to process all the data. Um, so thank you for joining us so quickly after it. But we want to get this episode out as quick as possible. So, I mean, the headline is that that we've seen uh inflation fall from 3.8% down to 3.5%. That's above what most economists were estimating the numbers would be. The trimmed mean, which people often talk about being the reserve bank's preferred measure because it strips out some of those volatile elements, is sitting at 3.6%. I just want to go for top kind of top top level analysis, is this evidence that the three interest rate rises we've already seen haven't been enough?
And will the Reserve Bank be forced to hike even further, do you think?
I think it suggests that we probably need another rate hike. The increase in the trim mean definitely concerns me. And some of the components also look A little bit. Too high, particularly in things like dwelling construction costs. We know that that's been a problem for the past six months, but The broader issue is really that in the past twelve months we've seen this continued increase in the trimmed mean, which is basically the underlying rate of inflation. And I just think it's way above the RBA's comfort level and we've actually now revised up our estimate for the September quarter inflation figures and
Is the recent drop to 3.5% inflation enough to stop RBA rate hikes?
that's now looking like it's gonna be above the RBA's own forecast. So It's gonna be a problem for them. I think it will be hard at upcoming meetings, especially after we get the quarterly inflation data. for the RBA to argue that they're still on track with their inflation forecast.
And do you think it's likely then that we will see a hike at the next meeting, which is at the end of September? So wait, we will have more inflation data just before that meeting, is that right?
Yeah.
Or do you think it's more likely it'll happen in November?
We get another monthly uh before the next meeting, but our our base case has been that we get another rate hike in November. And that will follow the usual quarterly inflation data and we know that there's still some Issues with the monthly trimmed mean. That's why the RBA prefers to look at the quarterly, which they have a really long time series for, you know, maybe there are just funny things that are going on with the monthly numbers which can move up and down. So I think that they'll probably prefer to wait for the quarterly. Also because the uh that would give them more time to assess what's going on in the labour market and to see if there is actually any more movement. on impacts of prior rate increases.
Plus, they probably want to see what's what's happening to property prices if they're falling even more. or they're sort of or the big falls have sort of started to moderate. I mean that's what the daily data suggests. But I think they're probably just want to buy themselves a bit more time rather than really trying to put a massive handbrake on the economy right now.
Uh what did you make of the minutes that we had out yesterday from uh from the last Reserve Bank meeting?
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Chapters
8 chapters
1
What does the latest inflation data reveal about price trends in Australia?
0:00–2:43
2
Is the recent drop to 3.5% inflation enough to stop RBA rate hikes?
2:43–5:17
3
How is the trimmed‑mean inflation measure influencing the RBA’s outlook?
5:17–8:02
4
Will the RBA raise rates again in September or wait until November?
8:02–10:34
5
What do the RBA’s latest meeting minutes suggest about future policy?
10:34–14:02
6
Why are housing construction and rental costs still driving inflation?
14:02–17:12
7
How might Canada’s new tariffs on the US affect the global economy?
17:12–19:40
8
What are the implications of the US bond‑market moves for interest‑rate expectations?
19:40–21:57