OECD inflation falls to lowest level since 2021

The news: Inflation across OECD countries fell to its lowest level in two years in October.

The numbers: Across the OECD, inflation fell to 5.6% in October, a decrease from 6.2% in September. Australia’s headline CPI also fell 60 basis points (or 0.6%) to 5.4% in Q3 from 6% in Q2 this year.

The context: Food inflation cooled across most of the 38 OECD countries, reaching 7.4% in October down from 8.1% the month prior. While energy inflation across the OECD was negative in October, Australia’s energy CPI increased from 4.1% in Q2 to 9.1% in Q3.

The OECD’s Economic Outlook released last week explained that the Commonwealth Government’s Energy Price Relief Plan, which sets a cap on wholesale coal and gas prices and provides targeted energy bill relief, is expected to reduce headline inflation by 0.75% by Q2 2024. The OECD also observed that Australian inflationary pressures are now under control, and expects the RBA to cut rates by 0.75% during H2 2024 and H1 2025.