The Australian Bureau of Statistics (ABS) will by then have published the quarterly Consumer Price Index (CPI), covering the first quarter of 2025. Broadly speaking, experts are not expecting inflation to cool off any more than it already has. Among forecasters surveyed by Bloomberg, none expect Q4 headline CPI inflation to fall below 3%. This shift has important implications for the Reserve Bank of Australia’s (RBA) forthcoming monetary policy deliberations. We anticipate this release to occur in May. It will happen right in time for the RBA’s meeting on May 19-20, when they will be reconsidering their monetary policy.
The expected monthly CPI for March would translate to an annual inflation rate of 2.3%. If these forecasts come to pass they would provide the basis for market expectations of more interest rate cuts from the RBA. The central bank’s favourite inflation measure, RBA Trimmed Mean CPI, is set to show a 2.9% yr increase for the fourth quarter. This will point to a slow easing in price pressures.
Outlook for Consumer Price Index
As a placeholder for Q1 2025, we used an increase of 0.8% over the previous quarter, and an increase of 2.2% over last year. This indicates that inflation is beginning to moderate. The ABS data only comes out approximately 25 days after the quarter has finished. It has an outsized impact on market perceptions and expectations, and has a profound effect on the AUD’s valuation.
Expectations are for the RBA Trimmed Mean CPI to come in at +0.7% q/q. This represents a modest acceleration from the prior quarter’s growth of 0.5%. Yet these figures leave little doubt that inflation is cooling considerably. Financial markets are becoming increasingly convinced that the price pressures will dissipate well before early 2025.
“This easing could pave the way for additional RBA interest rate cuts,” said one market analyst, reflecting a consensus view among economists regarding the potential impact of these CPI figures.
Economic Growth and Market Implications
RBA’s latest forecasts for Australia’s GDP growth show Australia returning to above-trend growth, of about 2.2%, by 2025. This positive growth outlook combined with improving inflation conditions might give the RBA more leeway to consider interest rate rises.
The quarterly CPI published by the ABS has historically had a considerable impact on market dynamics and the AUD’s valuation against other currencies. Inflation expectations are moving in the wrong direction, and fairly quickly. Investors are eagerly focused on how these economic drivers will steer the RBA’s monetary policy decision making.
While AUD/USD may wobble, analysts still see signs that the bullish path is here to stay.
“The AUD/USD pair is consolidating gains and despite intraday back and forth, the bullish case remains firm in place,” – Valeria Bednarik, FXStreet Chief Analyst.
Looking at technical indicators, a correction appears to be looming as momentum recedes from recent highs.
Currency Movements and Future Projections
The economic landscape continues to shift, and the AUD is reacting. After touching new heights for 2025, it has begun to relent vs the greenback. Even through this recent downtrend, market analysts are predicting some support levels near price critical junctures.
“The AUD/USD pair should find initial near-term support in the 0.6340 region,” – Valeria Bednarik, FXStreet Chief Analyst.
If the currency pierces this support level, it may be in for more severe downturns. In terms of technical indicators, we find very strong support at 0.6280 with converging moving averages, as shown in the chart above.