AMP Predicts Australian Inflation Will Slow to Approximately 4% By December

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According to AMP Capital Markets, Australian inflation is expected to slow this year after peaking in the final three months of 2022. On Tuesday, the Reserve Bank of Australia (RBA) is likely to raise the cash rate for the first time in five years, further contributing to a slowdown in inflation.

Diana Mousina, the senior economist at AMP, said, “Consumer price rises are expected to slow to about 4% by December after reaching a 32-year high of 7.8% last quarter.

The crucial trimmed mean inflation figure, which excludes the most volatile price moves, is targeted by the central bank and came in at 6.9% for the year to December. This is significantly higher than the 6.5% that the RBA had expected.

AMP said that food prices had been one of the main drivers behind this increase in inflation, with prices rising more than expected in recent months. In addition, energy prices have also increased due to a rise in global commodity prices throughout 2021.

Other factors included housing affordability and wage growth, lagging behind overall consumer price rises. Furthermore, the government’s goods and services tax (GST) cuts are also affecting consumer spending and price rises across various sectors of the economy.

Experts have cautioned that the country needs to prepare for a possible rise in global economic uncertainty, which could lead to higher commodity prices and dampen consumer confidence. The Australian dollar has also weakened against its US counterpart lately, which could prompt further changes.

AMP’s outlook expects Australian inflation should remain well-contained, barring any unforeseen shocks or external influences on prices domestically or abroad. Inflationary pressures should also remain relatively muted for the coming months even if there is an unexpected rise in consumer demand or growth slows down unexpectedly as businesses adjust their operations accordingly.

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