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Australia’s inflation eased in the June quarter, with softer fuel prices helping slow overall consumer price growth and core inflation coming in below market expectations. The latest data strengthens the case for the Reserve Bank of Australia (RBA) to keep interest rates on hold, as underlying price pressures show signs of moderating.
According to figures released Wednesday by the Australian Bureau of Statistics (ABS), Australia’s Consumer Price Index (CPI) increased 0.6% in the June quarter, slowing from the 1.4% rise recorded in the previous quarter. On an annual basis, headline inflation edged down to 4.0% from 4.1%.
The monthly CPI indicator also pointed to easing price pressures. Consumer prices declined 0.1% in June, bringing the annual inflation rate to 3.8%, reflecting lower fuel costs after earlier spikes in energy prices.
The closely watched trimmed mean CPI, the RBA’s preferred measure of underlying inflation, rose 0.8% during the quarter. While still higher than the previous reading, it fell short of economists’ expectations for a 0.9% increase. Annual trimmed mean inflation accelerated slightly to 3.6% from 3.5%, but remained below the market consensus of 3.7% and the RBA’s forecast of 3.8%.
The weaker-than-expected core inflation reading is likely to reduce pressure on policymakers to consider additional interest rate increases in the near term. The RBA has repeatedly stressed that underlying inflation is a key factor in determining the future path of monetary policy.
Although inflation remains above the central bank’s target range, the latest data suggests price growth is gradually easing as earlier cost pressures, particularly from fuel, continue to fade.
Investors will now closely monitor upcoming economic indicators, including labor market data and consumer spending, for further clues on the RBA’s next policy move. If inflation continues to cool and underlying price pressures remain contained, expectations for a prolonged pause in interest rates are likely to strengthen, offering relief to households and businesses facing elevated borrowing costs.
