February CPI came in slightly softer than expected, with headline inflation easing to 3.7% YoY, though still above the Reserve Bank of Australia’s 2–3% target band.
While inflation tracked slightly softer than the market forecasts of 3.8%, the expected surge in fuel prices is likely to push headline inflation higher in the March print, challenging the sustainability of the current disinflation trend.
Rising oil prices and a firmer US dollar, driven by geopolitical uncertainty, are beginning to reintroduce upside risks to inflation, reinforcing concerns that the recent CPI softness may prove temporary.
Reflecting this backdrop, Reserve Bank of Australia Assistant Governor Kent emphasised that the Board’s recent decision was finely balanced, with forward-looking data pointing to renewed inflation pressures into H2 2025, alongside tightening labour market conditions and capacity constraints.
