Inflation in Australia is falling but will interest rates follow?

While demand-driven factors are now contributing less to inflation than at any time in the post-COVID-19 period, and are in fact back in line with ‘normal settings’, the supply side of the economy is still problematic, writes KPMG Chief Economist Brendan Rynne.

As expected, the Reserve Bank of Australia (RBA) Board has announced it will keep the cash rate at 4.35 percent - meaning the cash rate will be kept at its cyclical peak for at least 15 straight months, even if the RBA decided to drop the policy rate in February. The Board last held the cash rate at its cyclical peak for this long in 1995-96 when it was at 7.5 percent for a straight 18 months. This timescale would be matched if the futures market is correct and the RBA starts to loosen mone...

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Authors: Brendan Rynne

Published Date: 11 December 2024