RBA on Watch: Inflation Drops to Lowest Since Oct 2024

The Australian Bureau of Statistics (ABS) released the May 2025 Monthly Consumer Price Index (CPI) data, showing a year-on-year increase of 2.1%. This is a decrease from 2.4% in April and represents the lowest annual inflation rate since October 2024. The Trimmed Mean, which indicates underlying inflation, also fell to 2.4% year-on-year from 2.8% in April, reaching its lowest point since November 2021. CPI excluding volatile items and holiday travel saw a slight decrease from 2.8% to 2.7% year-on-year.

The main contributors to the annual CPI movement were increases in food and non-alcoholic beverages (+2.9%), housing (+2.0%), and alcohol and tobacco (+5.9%). Despite these increases, the overall trend points to easing price pressures. The May CPI result of 2.1% was lower than market expectations of 2.3%, indicating a continued slowdown in inflation.

This softer inflation data suggests that price pressures in Australia are diminishing. This trend could influence the Reserve Bank of Australia's (RBA) monetary policy decisions, potentially reducing the need for further interest rate hikes.