Australia’s Inflation Slows in November, but Core Prices Remain Stubborn

Post by : Saif

Australia’s inflation slowed more than expected in November, offering some relief to households and policymakers. However, underlying price pressures remain strong enough to keep fears alive that interest rates could rise again early next year.

Data released by the Australian Bureau of Statistics showed that the monthly consumer price index did not rise at all in November. On a yearly basis, inflation eased to 3.4%, down from 3.8% in October. Economists had expected prices to increase both monthly and annually, so the softer result came as a mild surprise.

The slowdown was largely driven by falling prices in clothing, footwear, furniture, and household goods. These items were heavily discounted during Black Friday sales, which helped pull overall inflation down. Prices for recreation and cultural activities also fell, as demand for domestic travel eased after the holiday season.

Despite this improvement, inflation is not fully under control. The trimmed mean measure, which removes extreme price changes and is closely watched by the Reserve Bank of Australia, rose by 0.3% during the month. On an annual basis, core inflation stood at 3.2%, only slightly lower than the previous month and still above the central bank’s target range of 2% to 3%.

Housing costs remain a major concern. Prices rose by a strong 1.1% in November, driven mainly by higher rents and the cost of building new homes. This suggests inflation in essential living expenses is proving difficult to bring down and could continue to pressure family budgets.

Financial markets reacted calmly to the data. The Australian dollar dipped briefly before recovering, while government bond prices showed little movement. Investors still believe there is a real chance that the Reserve Bank could raise interest rates again as early as February. Market pricing suggests about a 33% risk of a rate hike next month.

The Reserve Bank cut interest rates three times last year, bringing the cash rate down to 3.6%. However, it has repeatedly warned that the next move could be upward if inflation does not fall back into the target range. Inflation picked up again in the third quarter of last year, raising concerns that monetary policy may not be tight enough.

Some major banks, including the Commonwealth Bank of Australia and National Australia Bank, expect a quarter-point rate increase in February. They argue that the economy is running close to full capacity and that inflation pressures may not ease without further action. The labour market has remained strong, with unemployment staying low at around 4.3%, which also adds to inflation risks.

Economists say the Reserve Bank is paying close attention to quarterly inflation data, which is due later this month. If core inflation stays at or above current levels, pressure will grow on the central bank to act.

From an editorial point of view, the November data offers cautious optimism but no clear victory. While falling prices in some areas are welcome, the persistence of high housing and core inflation shows the fight against rising costs is not over. For households, this means relief may be slow. For policymakers, it means difficult decisions still lie ahead.

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