RBA Gets Relief from Cooler Than Expected Inflation Rate

Australia's core inflation rate came in lower than expected in the last quarter, giving the Reserve Bank of Australia (RBA) some breathing space. The annual trimmed mean gauge of consumer prices rose 3.6%, compared to a forecasted 3.7%. This figure is below the RBA's target range of 2% to 3%.

The quarterly increase was also lower than anticipated, at 0.8% from three months earlier, down from a predicted 0.9%. As a result, traders sharply reduced their bets on another interest rate hike this year, from over 90% to around 50%. The currency dipped and the policy-sensitive three-year government bond yield fell by nine basis points to 4.48%.

RBA Governor Michele Bullock acknowledged that inflation has been above target for an extended period, but noted that it is unlikely to need to resume tightening on August 11 when updated quarterly forecasts are released. Bullock also expressed concern about potential supply shocks due to global instability and the ongoing conflict in the Middle East.