Inflation for 12 months to August dropped to 2.7% down from 3.5% in July, however the underlying inflation figure is what the reserve bank is monitoring and is using to decide whether to drop the cash rate. Underlying inflation (trimmed mean) fell to 3.4% in August down from 3.8% in July and it is calculated after reducing the impact of irregular or temporary price changes to inflation. In short inflation is heading in the direction expected by most economists and the underlying inflation figures are the lowest reading in the past 2.5 years. AMP economist Diana Mousina believes the reserve bank will be cutting rates by February 2025.
