Australia's core inflation reached 0.7% for first three months of 2025

Australia's core inflation for the first quarter of 2025 came in above forecasts. This has dampened expectations of rapid rate cuts by the country's central bank this year and sent the national currency higher, Bloomberg says.

According to the Australian Bureau of Statistics, the core consumer price index rose to 0.7% in the first three months up from 0.5%. The reading is above the forecasted advance to 0.6%. On an annual basis, core inflation accelerated to 2.9% compared to the expected increase to 2.8%.

IFM Investments believe that despite the annual rate returning to the Reserve Bank of Australia's (RBA) target range of 2–3% for the first time in three years, the regulator will remain cautious when adjusting monetary policy. A reduction in borrowing costs is expected in May, but a similar move in July is not guaranteed. Another rate cut is most likely to take place in August.

Bloomberg reports that markets are pricing in four cuts in borrowing costs in 2025 as the RBA will be forced to shield Australia's economy from global trade tensions. At the same time, expectations for a fifth rate cut weakened after the inflation report.