Underlying Inflation Drops Into the RBA’s Target Band

• Q1 2025 inflation printed at 0.9% q/q, hotter than market expectations of 0.8%. Annual headline inflation edged up to 2.4% y/y, sitting within the RBA’s 2–3% target band.
• Core inflation (Trimmed Mean) rose 0.7% q/q, taking the annual pace to 2.9% y/y—bringing it back into the RBA’s target range for the first time in two years.
• Electricity prices surged 16.3%, largely due to the wind-down of rebates, notably Queensland’s $1,000 lump sum.
• Market services inflation—which captures price growth in private sector services—fell by 0.1% q/q, the first decline since 2020.
• Despite the slightly hotter headline print, the underlying moderation in inflation has reinforced market expectations for easing, with five RBA rate cuts still priced in for the year.