Headline inflation eased in May, with consumer prices increasing at an annual pace of 4 per cent, down from 4.2 per cent in April.<\/p>\n
Automotive fuel prices dropped by 11.9 per cent in May, on lower global fuel prices, and that helped to drag headline inflation down.<\/p>\n
But trimmed mean inflation, the Reserve Bank’s preferred measure of underlying inflation, still increased to 3.6 per cent in May, up from 3.4 per cent.<\/p>\n
Underlying inflation allows economists to look beneath the daily noise of random price movements to see what the economy’s broader inflationary pressures are looking like.<\/p>\n
Reserve Bank keeps interest rate at 4.35pc<\/a><\/p>\n The Reserve Bank keeps the interest rate at 4.35pc as Australia’s economy slows down.<\/p>\n And the Bureau of Statistics says underlying inflation is now running at its highest annual pace since the September quarter of 2024.<\/p>\n The RBA has warned that inflation will trend higher in coming months as the fallout from the global energy shock keeps working its way through Australia’s supply chains.<\/p>\n “Today’s CPI data is an unwelcome reminder that Australia’s inflation problem is not yet solved, with another rate hike in 2026 still likely,” Deloitte Access Economics partner Stephen Smith said.<\/p>\n “The economy slowed sharply<\/a> in the March quarter, households are cautious, and the labour market is cooling<\/a>.<\/p>\n “That may normally suggest the central bank needs to be patient. But with underlying inflation now above the 2.5 per cent target for almost five years, today’s result means the Reserve Bank must remain vigilant.”<\/p>\n An uncomfortable situation, a mixed bag<\/p>\n Harry Murphy Cruise from Oxford Economics Australia said underlying inflation was the core challenge for the RBA at the moment.<\/p>\n