The latest inflation expectations figure from ANZ bank and Roy Morgan is not offering any hope for a cash rate pause or cut this year.
Inflation expectations for the week of August 19 to 25 was 4.8 per cent, inching up just 0.1 percentage points from the week before when it had fallen to a 2.5-year low.
However, the latest weekly reading is below the average so far this year of 5 per cent and down from 5.1 per cent recorded in July last month.
Looking back over the first seven months of the year, weekly inflation expectations moved in a narrow band between 4.8 per cent and 5.3 per cent and averaged 5.0 per cent.
A key driver for the recent shift in inflation expectations was slightly improving petrol prices, which dropped by over three cents per litre to $1.90 in July to the lowest since January 2024.
After July ended, average retail petrol prices subsequently declined throughout August and have so far averaged under $1.90 per litre during the month.
Looking back, average retail petrol prices have now been above $1.80 per litre for a record 59 straight weeks since mid-July 2023 – over a year.
Average retail petrol prices hit a low of $1.86 per litre in early July and are now even lower at $1.82 per litre in late August. Average retail petrol prices have now averaged $1.95 per litre since mid-January.
The persistently high petrol prices are clearly a key factor putting upward pressure on inflation expectations, Roy Morgan and ANZ reported.
The latest official monthly annual CPI figure from the Australian Bureau of Statistics (ABS) is at 3.8 per cent for June 2024. This is up 0.4 percentage points from a low of 3.4 per cent for the three months of December 2023 to February 2024.
The recent increases in the official inflation figures in the last few months above the Reserve Bank’s inflation target of 2-3 per cent over the course of the economic cycle has led to renewed discussion of further RBA interest rate increases that may be undertaken over the remainder of the year.
“Looking forward, the ABS is set to release the July 2024 monthly CPI figures later this week,” Roy Morgan CEO Michele Levine said. “The ABS figures will be keenly watched to see if the monthly figure continues to decline (3.8 per cent for June, down 0.2 per cent points from May), remains unchanged or even increases.
“The latest results from the weekly ANZ-Roy Morgan Inflation Expectations suggest the upward pressures on inflation were short-lived during July and have subsided in recent weeks as energy costs have fallen. The volatility in energy prices and inflation expectations shows how sensitive Australians are to changes in the prices of essential everyday goods – like petrol.”