Australia’s cost-of-living crisis has been the talk of the town for months, and the latest inflation figures have only added more fuel to the fire. 

While the headline inflation rate has held steady for the third month in a row, a subtle uptick in the underlying numbers has left many wondering: are we really on track for more interest rate cuts, or is the Reserve Bank of Australia (RBA) about to slam on the brakes? 

Let’s break down what’s happening, what it means for your hip pocket, and why the path ahead is anything but certain.

Inflation: The good, the bad, and the unexpected

According to the latest data from the Australian Bureau of Statistics (ABS), headline inflation sat at 2.4 per cent for the 12 months to April. That’s comfortably within the RBA’s target range of 2-3 per cent. 

But dig a little deeper and you’ll find the ‘trimmed mean’—the RBA’s preferred measure of core inflation—actually crept up from 2.7 to 2.8 per cent.

Now, a 0.1 per cent rise might not sound like much, but in the world of central banking, it’s enough to make policymakers sit up and take notice. 

It’s a reminder that inflation isn’t always a straight line down, and that the battle to bring prices under control isn’t over yet.

Why are we still feeling the pinch?

If you’ve been to the supermarket lately, you don’t need a government report to tell you that prices are still high. 

The ABS figures confirm what many of us already know: fruit and vegetable prices have jumped 6.1 per cent over the past year, and eggs have soared a staggering 18.6 per cent, thanks in part to bird flu outbreaks disrupting supply.

Rents are still climbing, too—up 5 per cent, though that’s the smallest increase since February 2023. 

On the flip side, there’s some relief at the petrol pump, with fuel prices dropping 12 per cent over the year. 

And if your electricity bill looks a little less frightening, you can thank government subsidies, which have helped push prices down 6.5 per cent. 

Without those rebates, electricity would have actually gone up by 1.5 per cent.

Interest rate cuts: Not a done deal

So, what does all this mean for interest rates? After last week’s rate cut, many were hoping for another in July. But the latest inflation data has thrown a spanner in the works.

‘The RBA remains cautious about inflation, and today’s reading shows why,’ says eToro market analyst Josh Gilbert. 

‘But let’s be clear, this isn’t a reason to panic; inflation doesn’t just move in a straight line, one way or the other.’

In other words, while inflation is still within the RBA’s target band, the slight uptick means the central bank is likely to take a wait-and-see approach. A July rate cut is no longer a sure thing—or, as the experts put it, ‘not nailed on’.

That said, the market is still betting on up to three more rate cuts this year, as the broader trend in inflation remains downward and the economy shows signs of slowing.

The economy’s other wobbles

It’s not just inflation that the RBA is watching. The latest data on construction work—a key indicator of economic activity—came in much weaker than expected, with growth stalling instead of rising as forecast. 

If next week’s GDP figures also disappoint, some economists believe the RBA could be forced to cut rates sooner rather than later to support the economy.

‘We increasingly feel that the RBA might cut faster or quicker if Q1 GDP data disappoints next week,’ says Krishna Bhimavarapu from State Street.

What does this mean for you?

As inflation figures continue to shape the outlook for monetary policy, many Australians are closely watching how these trends may influence future decisions by the Reserve Bank. 

While the data presents a mixed picture, its impact on household budgets, borrowing costs, and broader economic recovery remains a topic of growing interest.

What are your thoughts on the latest inflation figures and their possible implications for future rate cuts? Do you believe the Reserve Bank should stay cautious or move forward with additional cuts soon? How are you personally feeling the effects of current cost-of-living pressures? Share your perspective in the comments below—we’d love to hear from you.

Also read: Economist issues warning as RBA announces latest rate call