Australian Inflation Slows Down, Interest Rate Hike Bets Trimmed

Australia's inflation rate has slowed down more than expected in the June quarter, according to data released by the Australian Bureau of Statistics. The consumer price index (CPI) rose 0.6% in the second quarter from the previous period, after jumping 1.4% in the first quarter.

The annual CPI eased to 4.0% from 4.1%, while core inflation, measured by the trimmed mean, increased by 0.8% on-quarter, just below forecasts for a 0.9% gain. The Reserve Bank of Australia (RBA) had forecast an annual pace of 3.8%.

Markets have pared back their bets for an interest rate hike next month, with the chance now at just 4%, down from 21% previously. A hike this year is still priced at 50%. The Australian dollar fell 0.3% to $0.6953 and 3-year government bond yields declined 10 basis points to 4.482%.

Housing remains a source of inflation, with new dwelling prices jumping 5.8% in June from a year ago - the fastest pace in almost three years. Rent inflation held steady at an elevated rate of 3.6%. Russel Chesler, VanEck's head of investments and capital markets, warned that housing is still the biggest pressure point.