FX.co ★ Australia Inflation Gauge Drops for First Time in 3 Months

In May 2025, the Melbourne Institute's Monthly Inflation Gauge recorded a 0.4% decline, contrasting with the 0.6% increase observed in the previous month; this marks the first drop since February. This decline came on the heels of the Reserve Bank of Australia's decision to lower interest rates by 25 basis points to 3.85% during its May meeting. This move, anticipated by analysts, represents the first rate cut since January. According to the central bank, the risks associated with inflation are now more balanced, although uncertainties continue amid fluctuating global trade conditions. In the United States, the 10% baseline tariff on Australian imports remains unchanged, despite Prime Minister Anthony Albanese's appeals for its removal. Australia's Consumer Price Index (CPI) remained steady at a growth rate of 2.4% year-on-year in April, unchanged for the third consecutive month, marking the lowest rate since November 2024. Simultaneously, headline inflation stood at 2.4% in the first quarter of 2025, consistent with the fourth quarter of the previous year, reaching a four-year low. As for GDP growth, it is projected to improve, though potentially at a modest rate due to subdued external demand and a deceleration in domestic consumption.