Lower cost fuel and energy bill relief has helped bring overall inflation to its lowest level since early 2021.

A 2.8 percent rise in the consumer price index for the September quarter marks a return to the Reserve Bank’s target range of 2 to 3 percent, after a prolonged period above that -this.

The overall annual rate was down from 3.8 percent in the June quarter and was a bit weaker than consensus forecasts.

On a quarterly basis, the consumer price index rose 0.2 percent, well down from the 1 percent rise in the June quarter.

In broad terms, inflation has returned to where the RBA wants it to be, but that doesn’t necessarily mean it will start cutting interest rates at the next board meeting, which will be held on the Melbourne Cup.

Indeed, core inflation has become the priority to help manage the influence of energy bill relief and other cost-of-living measures that temporarily weigh on the numbers before they expire.

Reduced average core inflation rose to 3.5% a year, a solid decline from 4% but still too high to allow a reduction in interest rates, said Sean Langcake, head of macroeconomic forecasting at ‘Oxford Economics Australia.

“The RBA will largely ignore the impacts of the subsidies when it assesses interest rates next week,” he said.

The economic team remains of the view that reductions will only begin in the second quarter of 2025.

State Street Global Advisors APAC economist Krishna Bhimavarapu said there were a number of positives in the data despite subsidies weighing on the overall result.

“Reduced average inflation fell by half a percentage point to 3.5% year-on-year, in line with high-frequency indicators and should ideally help the RBA make a dovish turn,” he said .

“Delaying such a pivot could place the economy in a prolonged below-average growth rate. »

Electricity prices fell 19 percent during the quarter and would otherwise have increased slightly without government subsidies.

Automotive fuel prices fell 6.7 percent during the quarter as oil prices fell in response to a drop in demand around the world.

Declines in these categories offset a 1.3 percent rise in leisure and culture, driven by international and domestic travel during Europe’s peak tourist season and school holidays.

Prices for food and non-alcoholic drinks rose 0.6 percent in the quarter, with prices pushed up by restaurants and takeaways, meat and seafood, and fruit and vegetables.

Treasurer Jim Chalmers welcomed the “encouraging progress in the fight against inflation”.

“Our policies, including energy rebates, are making a significant difference and helping to combat inflation, but they do not explain all of the moderation in today’s figures,” he said. declared.

Annual inflation in non-tradable goods recorded its fastest moderation in almost three years, it said, rising 4.1 percent in the year to September, compared with 5 percent for year until June.

“Today’s figures show we are on track for a soft landing for our economy,” the Treasurer said.