Australia CPI inflation eases more than expected in Oct, but remains sticky

Investing.com-- Australian consumer inflation fell more than expected in October amid softening retail spending and a cooling labor market, but still remained well above the Reserve Bank of Australia’s target range. 

Consumer price index (CPI) inflation grew 4.9% year-on-year in October, data from the Australian Bureau of Statistics (ABS) showed on Wednesday. The reading was weaker than expectations expectations for a rise of 5.2%, and down sharply from the 5.6% seen in September. 

Easing oil prices and the baking-in of a fuel excise tax saw fuel prices rise at a slower pace than the prior month, while growth in rental and housing prices also slowed. Food prices rose at a faster pace, still keeping inflation relatively elevated.

Excluding volatile items such as fuel, fresh food and holiday travel, CPI inflation grew 5.1% in October, slower than the 5.5% rise seen in September, data from the ABS showed. 

While the headline CPI figure fell sharply from the 8.4% peak seen at the beginning of 2023, the reading still remained well above the RBA’s 2% annual target. Sticky core inflation also showed that underlying price pressures remained in play. 

Still, the reading also came after other data showed that Australian retail spending was slowing, while the labor market also appeared to be cooling slightly after a strong run over the past two years.

The readings, coupled with Wednesday’s CPI print, gave further credence to bets that the RBA was done raising interest rates, and will consider rate cuts next year. 

But the central bank has warned that inflation could still remain sticky in the coming year, with CPI inflation only set to fall within the RBA’s target range by mid-to-late 2025. 

Governor Michele Bullock warned earlier this week that inflation still posed a risk, and that the RBA will be cautious in adjusting policy going forward. 

The Australian dollar slightly trimmed recent gains after Wednesday’s reading, but remained close to a near four-month high.