Reserve Bank of Australia economist Plumb
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Will continue to focus on quarterly CPI data for forecasting
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Have also been analysing underlying inflation measures using monthly CPI
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Remain focused on quarterly trimmed mean, any change some way off
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Aim to assess which underlying inflation measures from monthly data will be preferred in a post-quarterly CPI world
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Will engage widely and communicate our thinking ahead of any decisions
At its last meeting on February 3, the Reserve Bank of Australia raised the cash rate by 25 basis points to 3.85%, citing a material pickup in inflation during the second half of 2025. While inflation remains well below its 2022 peak, the Board judged that recent strength reflects rising capacity pressures in the economy and that inflation is likely to remain above target for some time.
The decision was driven by stronger-than-expected growth in private demand, supported by solid household spending and business investment. Housing activity and prices are firming, financial conditions eased through 2025, and credit remains readily available. The Board also noted that earlier rate cuts may not have fully flowed through to demand, prices, and wages.
Labour market conditions remain somewhat tight. The unemployment rate is slightly lower than expected, underutilisation remains low, and while wage growth has eased from its peak, broader wage pressures and unit labour costs remain elevated.
The Board acknowledged uncertainty around how restrictive policy currently is, but judged that demand growth exceeding supply capacity could further add to inflation pressures. Global risks remain, though Australia’s major trading partners have recently surprised to the upside.
Bottom line: Inflation has picked up more than expected, demand is strong, labour markets remain tight, and the RBA has resumed tightening to ensure inflation returns to target. The decision was unanimous, and future moves will be guided by incoming data and evolving risks.
Technically, the AUDUSD moved up to the highest level since February 2023 on February 12 at 0.71464. Since then the price has rotated back down, trading to a low on Friday at 0.7014 before bouncing back to the upside.
Earlier today, the pair pushed higher on broad USD selling, but that momentum has faded and price has since rotated lower.
Technically, the move has shifted the short-term tone. The pair has fallen back below both the 200-hour moving average at 0.7075 and the 100-hour moving average at 0.7063, putting sellers back in control on the hourly chart
