Australia's Inflation Rate Slows, Traders Reassess RBA Hike Bets

Australia's inflation rate slowed down in the June quarter, sparking traders to reassess their bets on a potential interest rate hike by the Reserve Bank of Australia (RBA). The country's consumer price index (CPI) rose by 0.6% in the June quarter, after a 1.4% jump the previous quarter, while annual CPI eased to 4.0%, from 4.1%. Core inflation, measured by the trimmed mean, increased by 0.8% in the quarter, just under forecasts of a 0.9% gain.

The RBA has raised interest rates three times this year to tame inflation, fully reversing the policy easing implemented last year. Governor Michele Bullock said it was not clear if rate hikes so far were enough to return inflation to target. Despite this, markets have pared back their expectations for a further hike next month, with the chance now at just 4%, from 21% previously.

The Australian dollar fell by 0.4% to $0.6949 in response to the inflation data, while three-year government bond yields declined by 10 basis points to 4.479%. A hike this year is still priced at 40%.