Headline inflation stable at 2.4pc while RBA's preferred measure drops within targetBy business reporter Gareth HutchensTopic:Inflation2h ago2 hours agoWed 30 Apr 2025 at 1:34amThe Reserve Bank uses interest rate moves to try and keep annual consumer price rises between 2-3 per cent. (ABC News: Sharon Gordon)abc.net.au/news/inflation-march-quarter-2025-stable/105232824Link copiedShareShare articleHeadline inflation has remained steady but the Reserve Bank's preferred measure of consumer prices has fallen within the RBA's target band for the first time in more than three years.The Australian Bureau of Statistics March quarter data show headline inflation remained steady at an annual rate of 2.4 per cent, while the RBA's preferred measure of "trimmed mean inflation" dropped from 3.3 to 2.9 per cent.Economists surveyed by Reuters generally expected headline inflation to ease to 2.3 per cent for the 12 months to March, with the trimmed mean figure falling to 2.8 per cent — within the Reserve Bank's 2-3 per cent target range.Ahead of the data release, markets were pricing in the virtual certainty of a 0.25-percentage-point interest rate cut on May 20, with a slim chance of a larger cut at that RBA meeting.The data show headline inflation increased by 0.9 per cent in the March quarter, which followed two quarters in a row of smaller 0.2 per cent rises.That explains why the annual rate of headline inflation remained at 2.4 per cent in the March quarter — if inflation had been a little weaker in the March quarter, the annual rate would have declined a little.However, with the trimmed mean measure of inflation falling to 2.9 per cent, which is back within the target band, economists say things are tracking as the RBA forecast."The RBA won't pay much attention to the headline inflation rate, given that it remains distorted by myriad government subsidies and administered price changes," Abhijit Surya from Capital Economics said."Overall, the big picture is that inflation is evolving broadly in line with the RBA's expectations."If trimmed mean CPI keeps rising at the pace we've seen over the last couple of quarters, it should fall to 2.7 per cent by mid-year, in line with the Bank's February projections."Given the ongoing tumult and financial market volatility, that should be enough for the RBA to cut rates by 25 basis points, to 3.85 per cent, in May," he said.The impact of electricity rebates on inflation in the March quarterCallam Pickering, Asia-Pacific economist at Indeed, said the lift in headline inflation in the March quarter showed the impact of government electricity rebates on inflation.He says the 0.9 per cent quarterly rise in inflation was quite large, but it was primarily due to a 16.3 per cent increase in electricity prices which occurred after many subsidies had worn off."In Queensland, most households have used up their $1,000 electricity rebate, which suppressed electricity prices in both the September and December quarters," he said.Inflation has fallen, but prices won't be coming downPhoto shows Hand holding money, notes and coins with a coffee cup and fruit in the background, cost of livingInflation has fallen, but prices won't be coming down. These five graphs explain what's going on."The out-of-pocket spending on electricity in Queensland essentially quadrupled in the March quarter."Households in other states were also impacted to a lesser degree, with federal government energy subsidies also lower in the March quarter than in the December quarter."It's a useful reminder of just how distorted Australia's inflation figures are due to attempts to reduce cost-of-living pressures. And it's also why it is so important to focus on underlying measures of inflation, which remove the impact of these subsidies," he said.To that end, Mr Pickering said it was significant that underlying inflation had fallen back within the RBA's 2-3 per cent inflation band for the first time since the December quarter 2021."The RBA is going to cut rates when they meet in mid-May," he said."That was likely true even if these inflation figures contained a nasty surprise. But there were no nasty surprises and key metrics, such as trimmed mean and service sector inflation, both improved."Services inflation lowest since June 2022When dividing the data into "services" price inflation and "goods" price inflation, it reveals annual services inflation declined to 3.7 per cent in the March quarter, down from 4.3 per cent in December.That was the lowest annual inflation for services since June 2022.The decline in services inflation was driven by lower prices for rents and insurance.Annual goods inflation picked up from 0.8 per cent to 1.3 per cent largely due to electricity prices increasing so much in the March quarter.Posted 2h ago2 hours agoWed 30 Apr 2025 at 1:34am, updated 1h ago1 hours agoWed 30 Apr 2025 at 3:08amShare optionsCopy linkFacebookX (formerly Twitter)Top StoriesPM addresses National Press Club ahead of campaigning blitzLIVEPhoto shows Anthony Albanese holds hands with his fiancee as they smile and walk into a rally.Inflation 'clears way' for RBA interest rate cut in MayLIVEPhoto shows RBA buildingThere's a reason Dutton can't resort to a scare campaign with older AustraliansAAnalysis by Annabel CrabbPhoto shows Peter DuttonHolmes à Court fuels movement that denies he will have seat at tableTopic:Political Parties and MovementsPhoto shows shac tealErin Patterson served guests deadly meals on different coloured plates to her own, jury hearsLIVEPhoto shows A digital drawing of Erin Patterson wearing a pink shirtRelated storiesA supermarket catalogue from 2021 tells us plenty about this electionTopic:ElectionsPhoto shows An illustration of a shopping trolleyReserve Bank leaves interest rates on hold at April meetingTopic:Interest RatesPhoto shows People walking past the outside of the Reserve Bank of Australia in Sydney.Inflation has fallen, but prices won't be coming down. What does that mean?GAnalysis by Gareth HutchensPhoto shows Hand holding money, notes and coins with a coffee cup and fruit in the background, cost of livingRelated topicsAustraliaBusiness, Economics and FinanceEconomic GrowthEconomic Trends and IndicatorsInflationInterest RatesMonetary PolicyTop StoriesPM addresses National Press Club ahead of campaigning blitzTopic:Australian Federal ElectionsPhoto shows Anthony Albanese holds hands with his fiancee as they smile and walk into a rally.Inflation 'clears way' for RBA interest rate cut in MayTopic:Stock MarketThere's a reason Dutton can't resort to a scare campaign with older AustraliansAAnalysis by Annabel CrabbHolmes à Court fuels movement that denies he will have seat at tableTopic:Political Parties and MovementsErin Patterson served guests deadly meals on different coloured plates to her own, jury hearsTopic:CourtsJust InWatchdog finds pressure on pilots a factor in plane's WA highway crashTopic:Air Incidents3m ago3 minutes agoWed 30 Apr 2025 at 4:13amMore than 4 million Australians have already voted. 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