Inflation gauge throws spanner into RBA machinery

Monday 6 November 2023

Most economists and financial markets believe the Reserve Bank of Australia (RBA) is likely to lift the official cash rate by 0.25% at Tuesday’s meeting.

However, the Melbourne Institute headline monthly inflation gauge was released on Monday, which fell by 0.1% in October:

It was the first month of falling prices in 14 months.

The annual growth rate also eased to 5.1% from 5.7% in September:

The below chart from Alex Joiner shows that underlying inflation has fallen sharply:

Source: Alex Joiner

If the RBA was on the fence about whether to hike, this data could stay its hand.

We will find out 2.30 pm on Tuesday.

About the author

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.