RBA Rate Hike Expectations Unwind as Inflation Data Disappoints

The Reserve Bank of Australia (RBA) is likely to keep interest rates unchanged at its August meeting, following softer-than-expected inflation data. The annual trimmed mean inflation rose to a two-year high in the June quarter, but came in below economists' forecasts, reducing expectations of another RBA rate hike.

The quarterly increase of 0.8% was lower than market expectations for a 0.9% rise. Headline inflation eased to 3.8% in the year to June from 4.0% in May, also undershooting the 4.0% consensus forecast.

RBA governor Michele Bullock acknowledged weakness in housing and employment conditions while declining to explicitly describe the August meeting as 'live', but the softer inflation result is expected to support the S&P/ASX 200 benchmark.