Australian Inflation Slows Down, RBA Hike Bets Pared

The Reserve Bank of Australia (RBA) raised interest rates three times this year to tame inflation, but recent data suggests that further hikes may not be necessary. The Australian Bureau of Statistics reported on July 29 that consumer price inflation slowed down in the June quarter, with a 0.6% increase compared to a 1.4% jump in the previous quarter.

The annual rate of inflation eased to 4%, from 4.1%, and core inflation, which excludes volatile items like food and fuel, also came under market forecasts at 3.6%. This has led markets to reduce their bets on another interest rate hike next month, with a 40% chance priced in for the rest of the year.

The Australian dollar fell 0.4% to US$0.6949 after the release of the data, and three-year government bond yields declined by 10 basis points to 4.479%. RBA Governor Michele Bullock noted that it was unclear if previous rate hikes were enough to return inflation to target.

The labour market also showed resilience, with more jobs created in June despite a small increase in the unemployment rate.