Australia CPI Data Expected to Reinforce RBA’s Hawkish Stance Despite Modest Easing in April

The Australian Bureau of Statistics is set to release the Consumer Price Index (CPI) data for April this week, and market analysts anticipate a slight easing from the previous month’s reading. However, the modest decline is not expected to shift the Reserve Bank of Australia’s (RBA) hawkish policy stance, as underlying inflation pressures remain persistent.

What the April CPI Figures Are Expected to Show

Economists surveyed by major financial institutions forecast the monthly CPI indicator to have risen by 3.4% year-on-year in April, down from 3.5% in March. The small decrease would be driven primarily by lower fuel prices and some moderation in housing costs, particularly in rents and new dwelling purchases. However, services inflation — a key concern for the RBA — is expected to remain sticky, hovering around 4.0% to 4.2%.

The trimmed mean inflation measure, which strips out volatile items, is projected to hold steady at around 3.8% annually, well above the RBA’s target band of 2-3%. This underlying stickiness is the primary reason the central bank is unlikely to signal any near-term rate cuts.

Why the RBA Is Expected to Remain Hawkish

RBA Governor Michele Bullock has repeatedly emphasized that the board needs to see sustained evidence that inflation is returning to target before considering easing monetary policy. The April CPI data, while showing a slight headline improvement, is unlikely to provide the convincing evidence the board requires.

“The RBA’s focus is on the trajectory of underlying inflation, not just the headline number,” said Sarah Johnson, senior economist at Westpac. “Even if April’s CPI ticks down, the pace of disinflation is slow, and the labour market remains tight. That combination keeps the RBA in a hawkish holding pattern.”

Market pricing currently reflects a less than 20% probability of a rate cut at the RBA’s next meeting in June, with the first full cut not fully priced in until late 2025 or early 2026.

Implications for Borrowers and the Economy

For Australian mortgage holders, the prospect of rates remaining higher for longer means continued pressure on household budgets. The RBA’s cash rate has been at 4.35% since November 2023, and the April CPI data reinforces the view that this level will persist for at least the next several months.

Businesses, particularly in the retail and construction sectors, are also watching closely. High borrowing costs are dampening consumer demand and delaying investment decisions. A prolonged period of restrictive policy could weigh on economic growth, which has already slowed to just 0.2% in the fourth quarter of 2024.

Conclusion

The April CPI release is a key data point for the RBA’s policy path, but the expected modest easing does not change the central bank’s calculus. Until underlying inflation shows a clear and sustained decline toward the 2-3% target, the RBA is likely to maintain its hawkish stance. For investors, households, and businesses, the message remains the same: interest rate relief is not imminent.

FAQs

Q1: What is the RBA’s current cash rate?
The RBA’s cash rate is 4.35%, where it has remained since November 2023.

Q2: Why does the RBA focus on underlying inflation rather than the headline CPI?
The RBA uses the trimmed mean measure to strip out volatile price movements, providing a clearer view of persistent inflation trends.

Q3: When could the RBA consider cutting rates?
The RBA has indicated it needs to see sustained evidence that inflation is sustainably within the 2-3% target band. Most economists expect the first rate cut no earlier than late 2025.