Consumer prices to gauge inflation fight raging in 2025

Fresh from lowering interest rates for the first time in almost five years, the Reserve Bank will soon get more figures to help determine if a second cut is on the way.

Inflation data for the month of January is expected to show a slight uptick when released on Wednesday.

Commonwealth Bank economists have forecast monthly inflation to rise from 2.5 per cent to 2.7 per cent in January, within the target band of two to three per cent outlined by the Reserve Bank.

Trimmed mean inflation, which removes volatile price movements, is expected to come in at 2.8 per cent for the year to January, a rise from 2.7 per cent in December.

Quarterly inflation numbers carry more weight with the central bank but the monthly consumer price data will be among the first set of figures used to determine whether a further rate cut is on the cards.

The Reserve Bank on Tuesday announced a reduction of 25 basis points to 4.1 per cent, the first lowering of its cash rate since 2020.

Its board will next meet at the start of April, which could fall during a Federal election campaign.

The bank’s move was cautious but indicated future reductions, NAB head of Australian economics Gareth Spence said.

“The cash rate will ease gradually from here, with four more 25 basis-point cuts to take the cash rate to 3.1 per cent in February 2026,” he said.

“However, this will be data-dependent and risks are skewed towards a shallower cutting phase if data does not come in as expected.”

Reserve Bank governor Michele Bullock said inflation was slowing more than expected and a cut to rates was appropriate.

“The board remains cautious about the prospects for further policy easing,” she told a parliamentary inquiry on Friday, noting other countries had seen a rocky path to lowering inflation.

Data on construction activity in the December quarter will also be released on Wednesday, which is tipped to increase by 0.8 per cent.

Meanwhile, US stocks tumbled on Friday, extending their sell-off in the wake of dour economic reports and closing the book on a holiday-shortened week fraught with new tariff threats and worries of softening consumer demand.

All three major Wall Street indexes moved decisively lower on the heels of the data.

The Dow Jones Industrial Average fell 748.63 points, or 1.69 per cent, to 43,428.02, the S&P 500 lost 104.39 points, or 1.71 per cent, to 6013.13 and the Nasdaq Composite lost 438.36 points, or 2.20 per cent, to 19,524.01.

Australian share futures fell 64 points, or 0.77 per cent, to 12.309.

The benchmark S&P/ASX200 index on Friday shed 26.6 points, or 0.32 per cent, to 8296.2, while the broader All Ordinaries fell 30.8 points, or 0.36 per cent, to 8,570.9.