RBA Hike Bets Unwind on Softer Inflation Data

Australia's August inflation report has undershot expectations, adding to the unwind in hawkish RBA pricing that began after Governor Michele Bullock's press conference following the bank's interest rate decision on Tuesday.

The August inflation figures show a modest undershoot in both headline and trimmed mean inflation. Headline CPI rose 0.4% for the month and 4.0% over the year, compared to expectations of 0.5% and 4.1% respectively.

Trimmed mean inflation, the RBA's preferred measure of underlying price pressures, rose 0.2% against an expected 0.3%. The annual rate came in at 3.6%, unchanged from July and in line with expectations.

The unwind in hawkish RBA pricing has seen the implied probability for a 25 basis point hike at the RBA's next meeting on November 3 slump to just 20%, down from 44% last week.