Australia’s monthly inflation print came in at 2.4% year-over-year in April, holding steady from March but slightly above economists’ expected reading of 2.3%. This marks the third consecutive month that the indicator has remained at 2.4%, keeping inflation firmly within the Reserve Bank of Australia’s (RBA) 2-3% target band.
The trimmed mean measure of core inflation – RBA’s preferred gauge – ticked up to 2.8% from 2.7% in March, while a measure excluding volatile items and holiday travel also rose to 2.8% from 2.6%.
Despite these modest increases, all metrics remained comfortably within the central bank’s target range, reinforcing expectations that the RBA’s battle against inflation continues to show progress.
The largest contributors to annual inflation were:
- Food and non-alcoholic beverages (up 3.1%)
- Housing costs (up 2.2%)
- Recreation and culture (up 3.6%)
- Health costs rose 4.4% annually, driven by insurance premium adjustments that typically occur in April
- Holiday travel and accommodation jumped 5.3% due to stronger demand during Easter and school holidays
- Egg prices surged 18.6% over the past 12 months as bird flu outbreaks affected supply
- Fuel prices tumbled 12% year-on-year
- Electricity costs fell 6.5% thanks to ongoing government rebates
Link to ABS April 2025 CPI Report
Remember that the RBA had cut rates by 25 basis points to 3.85% just last week, marking its second reduction this year, as policymakers shifted focus from inflation concerns to growth risks amid global trade uncertainty.
Market Reaction
Australian Dollar vs. Major Currencies: 5-min
Overlay of AUD vs. Major Currencies Chart by TradingView
The Australian dollar, which had been trading in ranges (except against JPY) ahead of the release, saw brief strength following the CPI release before gradually falling back toward pre-announcement levels.
The initial pop likely reflected confirmation that inflation remains well-contained within the RBA’s target band, supporting the case for further monetary easing without suggesting any need for emergency action.
However, the currency’s inability to hold onto gains suggests markets remain divided on policy timing.
Money markets pared back July rate cut expectations from around 78% to 60-65% as the slightly hotter core inflation figures reduced confidence in back-to-back cuts. The market’s cautious reaction also probably reflected the RBA’s shift toward global uncertainties, particularly US trade policy under the Trump administration.
With Governor Michele Bullock having retired the “narrow path” analogy and expressed greater concern about external risks, traders appear more focused on geopolitical developments than domestic inflation dynamics.
For now, a risk-friendly trading environment is helping AUD recoup most of its post-CPI losses, with the currency only showing notable weakness against its fellow comdoll, the New Zealand dollar.
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