Australian Inflation Rate Eases, Markets Trim RBA Hike Bets

Australia's inflation rate came in lower than expected in the June quarter, with consumer prices rising by just 0.6% from the previous period, according to data released by the Australian Bureau of Statistics.

This was slower than the 1.4% jump seen in the first quarter, and annual inflation eased to 4.0%, down from 4.1%. The core inflation measure, which strips out volatile items like food and fuel, increased by just 0.8% on-quarter, coming in below forecasts.

The Reserve Bank of Australia (RBA) had raised interest rates three times this year to combat inflation, but the latest data suggests that further hikes may not be needed. Markets are now pricing in a less than 4% chance of an RBA rate hike next month, and a 50% chance of a hike this year.

The Australian dollar fell 0.3% to $0.6953 following the release of the data, while 3-year government bond yields declined by 10 basis points to 4.482%. Housing remains a source of inflationary pressure, with new dwelling prices jumping 5.8% in June from a year ago.