The odds of an interest rate cut next month have increased with official figures showing the RBA’s preferred measure of inflation fell to 3.2% over the year to December.
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00:00It was Melbourne Cup Day 2020, when Australians celebrated their last rate cut.
00:10Today's decision reflects the Reserve Bank Board's commitment to do what we reasonably
00:14can.
00:15More than four years later, and bets are firming, the next one could be just weeks away.
00:21It is good news, there are economists around the country saying cut baby cut.
00:25Certainly the markets are telling it that it's time to cut.
00:29Months after, the Reserve Bank's preferred measure of inflation fell to 3.2 per cent,
00:35the lowest it's been in three years.
00:38The RBA wants that number under three.
00:41So is 3.2 enough for a cut?
00:44This inflationary pressure that's less than they're anticipating means they don't need
00:49to keep rates as tight as possible and we think there's a rate cut coming in February.
00:54These numbers are better than expected and better than forecast.
00:58What they show is we are making very meaningful, very substantial and now sustained progress
01:04in the fight against inflation.
01:07There was also progress on headline inflation, which includes more volatile price changes.
01:13Prices for alcohol, tobacco, domestic flights and accommodation went up, while electricity
01:18bills tumbled as households continued to receive government rebates.
01:24Prices for fuel, new homes and fruit and vegetables also fell.
01:29The drop in underlying inflation now puts considerable pressure on the Reserve Bank
01:34to move on rates.
01:36Financial markets are certainly excited about it, pricing in a more than 90 per cent chance
01:41of rate relief in February.
01:44A rate cut would be welcome news for restaurant owner Julie Tran.
01:48She's not only got her own mortgage to worry about, but her customers too.
01:53The last thing that they have money for is to spend money to go out for a dinner or lunch.
01:58The most important thing here is to see some of the price pain that Australians have endured
02:04now, that that continues to ease.
02:07And the Treasurer will be hoping that continues, when the RBA next meets on February 18.