Inflation down but not out

The quarterly inflation rate of 0.5% and annual inflation rate of 2.2% is acceptable, even though a bit on the high side (I think the range should be 0 to 2%).

The breakdown annually is 4.5% for non-tradeables and -1.1% for tradeables. 4.5% is still too high and if I was the Reserve Bank I’d be tempted to only do a 0.25% drop in the cash rate.

Against that though the quarterly non-tradeable figure was only 0.7% and if you annualise that out, then that is 2.8% so under the 3% band.

While it is the overall rate that has to be under 3%, we have little control over tradeable inflation, but more so over non-tradeable or domestic.

The annual non-tradeable rate has been:

  • 2021: 5.3%
  • 2022: 6.6%
  • 2023: 5.9%
  • 2024: 4.5%

Hopefully in 2025 it will be well below 3%.

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