Australian Inflation Slows to Four-Year Low, Rate Cut Expectations Rise

Australia’s consumer prices rose at the slowest pace in more than four years during the June quarter, reinforcing market expectations for an interest rate cut by the Reserve Bank of Australia (RBA) next month.

Data from the Australian Bureau of Statistics showed the consumer price index (CPI) increased 0.7% in the June quarter, below market forecasts of 0.8%. Annual CPI inflation eased to 2.1%, down from 2.4%, and fell short of analysts’ expectations. This marks a significant slowdown, bringing headline inflation well within the RBA’s 2% to 3% target range.

Core inflation, measured by the trimmed mean CPI, also softened. It rose 0.6% in the quarter versus forecasts of 0.7%, while the annual rate declined to 2.7% from 2.9%. This is the lowest level in three years and signals easing price pressures across key sectors, including retail and housing.

The sharp cooling in inflation has strengthened market bets that the RBA could cut interest rates as early as its upcoming policy meeting. Investors are now pricing in a near-certainty of a rate reduction to support economic growth amid subdued consumer spending and global uncertainties.

Australia’s inflation trend mirrors easing price pressures seen in other major economies, boosting confidence that central banks can pivot toward more accommodative policies. Analysts suggest the RBA’s decision will hinge on upcoming labor market and wage growth data, which remain key indicators of underlying economic strength.

With inflation moderating and the economy showing signs of cooling, financial markets are closely watching the RBA’s next move, which could mark the start of a new phase in Australia’s monetary policy cycle.