Australia’s inflation undershoots forecasts, spurring traders to pare RBA hike bets
The Reserve Bank of Australia has raised the key interest rate three times this year so far
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[SYDNEY] Australian consumer price inflation slowed a tick in the June quarter as fuel costs eased from peaks, while core inflation undershot forecasts and lessened pressure for a further hike in interest rates.
The Australian dollar fell 0.4 per cent to US$0.6949, three-year government bond yields declined 10 basis points to 4.479 per cent, and markets pared back the chance of an interest rate increase next month to just 4 per cent, from 21 per cent previously. A hike this year is priced at 40 per cent.
Data from the Australian Bureau of Statistics out on Wednesday (Jul 29) showed its consumer price index (CPI) rose 0.6 per cent in the June quarter, after a 1.4 per cent jump the previous quarter. Annual CPI eased to 4 per cent, from 4.1 per cent.
The key trimmed mean measure of core inflation increased by 0.8 per cent in the quarter, just under forecasts of a 0.9 per cent gain. The annual pace picked up to 3.6 per cent, from 3.5 per cent, but came under market forecasts for 3.7 per cent and the Reserve Bank of Australia’s own forecast of 3.8 per cent.
For June alone, the monthly CPI fell 0.1 per cent, pulling the annual pace down to 3.8 per cent, the data has already been overshadowed by a 20 per cent surge in oil prices this month as US and Iran resumed attacks in the Gulf.
The Reserve Bank of Australia has raised the key rate three times this year to 4.35 per cent to tame inflation, fully reversing the amount of policy easing implemented last year. Governor Michele Bullock said on Tuesday it was not clear if rate hikes so far were enough to return inflation to target.
The labour market also stayed surprisingly resilient, with the economy churning out more jobs in June despite a small pick-up in the unemployment rate. REUTERS
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