Australia's trimmed mean inflation rose 3.6% annual, below the RBA's 3.8% forecast, reducing the case for an August rate hike.
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Australia's headline inflation slowed to 3.8% in the June quarter, the weakest annual pace in 12 months. The core measure the Reserve Bank watches most closely, the trimmed mean, rose to 3.6% from 3.5%, undershooting the 3.7% market consensus and the central bank's own 3.8% forecast published in May.
Quarterly headline CPI unexpectedly fell 0.1% from the first quarter, compared with expectations for a 0.7% increase. The quarterly trimmed mean rose 0.8%, matching the first-quarter pace yet below the 0.9% economists had forecast. The monthly CPI indicator for June showed headline slowing to 3.8% year-on-year from 4.0% in May, with the monthly trimmed mean steady at 3.6%.
Tradable goods prices declined 0.8% month-on-month, extending the disinflation trend in imported goods. Services inflation stayed firmer at 4.0% annually, while non-tradables rose 4.9%, indicating domestically generated price pressures are easing only gradually.
Governor Michele Bullock said last month that inflation was evolving broadly as the RBA expected. The second-quarter data, coming in below the central bank's own forecast, gives the Board little reason to resume tightening in August after three rate hikes this year and a pause in June. Policy makers still face inflation above the 2-3% target band, yet the case for another hike has weakened.
The RBA's next policy decision is Aug. 6. Markets now price a roughly 10% probability of a 25-basis-point increase, down from 20% before the release.
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