Weaker underlying inflation has increased the likelihood the Reserve Bank of Australia will cut rates by 25 basis points in February.
The minutes from the RBA’s December meeting noted that “if the future flow of data continued to evolve in line with, or weaker than, their expectations, it would further increase their confidence that inflation was declining sustainably towards target”.
ANZ economists believe the recent flow of data, particularly the October and November monthly Consumer Price Index (below) indicators, suggests the RBA’s preferred measure of inflation (trimmed mean) will print below its forecast in Q4.
“This should see the RBA cut the cash rate by 25bp at its February meeting,” Adelaide Timbrell and Sophia Angala say in a note today.
The expectation is for just two rate cuts in 2025, with the second to come in August.
The US Federal Reserve, however, is proceeding more cautiously after rolling out a 25-basis-point cut in December 2024.
The S&P/ASX 200 closed down 17.7 points, or 0.22%, at 8,213.30 points on Wednesday (15 January). The index has lost 1.63% for the last five days, but has gained 9.56% over the last 52 weeks.
Eight of the 11 sectors closed in the red led by information technology with a 1.25% retreat. The industrials sector was down 0.65% and energy slid 0.45%.
Materials again escaped the pull down of the broader market with marginal gains.
Liontown Resources (ASX:LTR) was the biggest mover of the S&P/ASX 200, advancing 7.41% to $0.58, while Nickel Industries (ASX:NIC) lifted 4.29% to $0.85.
Western Gold Resources (ASX:WGR) dominated the small caps with a 50% rally to $0.07 after advancing closer to mining at its Gold Duke Project in Western Australia with the naming of SSH Group as its preferred mining contractor.
Gold Mountain (ASX:GMN) also climbed 50%, to end the session at $0.003, after announcing it has defined 10 high-priority lithium targets for drilling at its Salinas II Project in the Bananal Valley in Brazil.
Nitrogen-based fertiliser hopeful NeuRizer (ASX:NRZ) slid 50% the other way to close down at $0.001 on no news, and Qx Resources (ASX:QXR) dipped 25% to $0.003.
The S&P/ASX200 is Australia’s leading share market index and contains the top 200 ASX-listed companies in terms of market capitalisation, and accounts for about 80% of the country’s equity market. The index is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation.
It is recognised as the institutional investable benchmark in the country.
Write to Angela East at Mining.com.au
Images: ASX & RBA
