Australia's Interest Rate Hike Bets Plummet as Inflation Eases

Australia's consumer price index rose at a slower pace in the June quarter due to easing fuel costs, while core inflation undershot forecasts and reduced pressure for further interest rate hikes. The Reserve Bank of Australia (RBA) now sees little chance of an interest rate increase next month, with markets pricing it at just 3%, down from 21% previously.

The RBA has raised the key interest rate three times this year to tame inflation, fully reversing last year's policy easing. Despite a small pick-up in the unemployment rate, the labour market remains resilient, and new dwelling prices jumped 5.8% in June from a year ago.

However, core inflation increased by 0.8% on-quarter, just below forecasts for a 0.9% gain. The annual pace picked up to 3.6%, but was below market forecasts for 3.7% and the RBA's own forecast of 3.8%. UBS still expects one rate hike in November, while Westpac is no longer tipping any rises from the RBA this year.