S&P/ASX 200 Index (ASX: XJO) investors hoping that Wednesday's cooling inflation data will see the Reserve Bank of Australia cut the official interest rate at its next meeting in February are likely to be disappointed.
That's according to the economics team at Commonwealth Bank of Australia (ASX: CBA).
Following the latest inflation print, released by the Australian Bureau of Statistics (ABS) yesterday, CBA noted, "The RBA's new monthly CPI data shows inflation took a breather in November, but it's unlikely to be enough for the RBA to change course."
Here's why.
CBA says ASX investors should still expect higher interest rates
The ASX 200 closed up 0.2% yesterday and is up 0.1% in late morning trade today, with stocks likely getting a modest boost from yesterday's moderately easing inflation data, boosting investor hopes of a February RBA interest rate cut.
According to the ABS, the Consumer Price Index (CPI) rose 3.4% over the 12 months to November.
That was down from the 3.8% annual increase reported in October. CBA noted the November print was better than expected. The consensus forecast was for Australia's headline inflation to fall to 3.6%.
However, CBA said that following resurgent inflation in the second half of 2025, the dip reported yesterday won't give the RBA the assurance it needs to keep from lifting the benchmark interest rate on 3 February from the current 3.60%.
CBA noted that the RBA's preferred measure is trimmed mean inflation, which excludes certain volatile items.
While trimmed mean inflation declined from 3.3% to 3.2% (after rising 0.3% month to month), it remains above the RBA's 2% to 3% target range, making any near-term interest rate cut unlikely.
"The undershoot on headline inflation should not be over‑interpreted," CBA economist Harry Ottley said. "The weaker‑than‑expected outcome largely reflected volatile items and does not appear to reflect any softening of demand in the economy."
And in unwelcome news for ASX 200 investors and mortgage holders alike, Ottley added, "We maintain our view that the RBA will increase the cash rate by 25 basis points to 3.85% in February."
What's happening with the new monthly CPI data?
CBA noted that with the ABS' monthly inflation measure still relatively new, "and yet to iron out seasonal kinks", the RBA is likely to wait until the December quarter inflation print, due out in late January, before forming a decision on the official interest rate.
Commenting on the ABS' new monthly CPI data, Michelle Marquardt, ABS head of prices statistics, said:
Having a monthly CPI means we can more clearly see temporary events such as Black Friday sales and compare them across time. In November 2024 and 2025, several goods categories had price falls including clothing, footwear and furniture.
As the price falls this year were similar to last year, the Black Friday sales were not a major contributor to the change in annual CPI inflation from October to November.
