RBA Rate Hike Odds Plummet as Australia's Inflation Rate Cools

Australia's inflation rate cooled down more than expected in June, making it less likely for the Reserve Bank of Australia (RBA) to raise interest rates next month.

The RBA had been considering a hike in August, but with headline consumer prices rising only 0.6% over the quarter and the annual rate ticking down to 4.0%, the odds of a rate increase have dropped to just 3%. The 'trimmed mean' inflation rate, which strips out large price swings, also came in lower than expected at 3.6% year-on-year.

The news sent shockwaves through markets, with Australian shares rising and the Australian dollar dipping. Short-term government bond yields fell, with the 3-year yield dropping to around 4.48%. Some major banks have also toned down their calls for an August hike.

However, not everyone is convinced that the inflation fight is over. Housing-related costs remain sticky, and services inflation is still running hotter than expected. If higher oil prices seep into transport and other bills, the RBA could keep the door open to later rate hikes.