Spring is here, and so is some great news! With inflation falling to 2.8%, it’s the first time since March 2021 that inflation has sat within the Reserve Bank of Australia’s (RBA) target range of 2 to 3%. This is something worth celebrating, but there’s more to the story.

A Win for Inflation, But the Battle Continues

The drop to 2.8% is a significant achievement in the battle against rising prices, but we’re not out of the woods yet. The problem? Underlying inflation—which strips out volatile items like fuel and food—is still stubbornly high at 3.5%. This is a bit frustrating because, while the overall inflation number looks good, the underlying figure shows there’s still some work to be done.

What Does This Mean for Interest Rates?

So, with inflation at 2.8%, you might be wondering what this means for interest rates. The good news is that the RBA is likely to keep rates on hold when they meet next Tuesday, which happens to be Melbourne Cup Day. This is a relief for many Australians, as interest rates have been rising steadily over the past year.

What’s Driving Inflation?

Interestingly, the main culprits behind the current inflation levels are fruit and vegetables as well as rising rent prices. That’s right—your grocery bill is having a bigger impact than you might think, and the cost of rent is also pushing inflation higher. It seems like every time you go to the supermarket, prices are creeping up, and that’s putting pressure on household budgets across the country.

What’s Next for Interest Rates?

While inflation has come down, underlying inflation remains high, meaning the RBA will be keeping a close eye on things. The consensus is that interest rates will stay steady for now, but there’s no certainty about what could happen as we head into Christmas and the new year.

For those attending the upcoming Property Summit, we’ll have a more in-depth discussion about what all this means for the property market and interest rates in 2024. For now, enjoy the good news—inflation has dropped, and interest rates are staying put for the time being.