Australian Inflation Cools More Than Expected, Easing Pressure on the RBA

Australia's inflation eased more than economists expected in the second quarter, offering relief to the Reserve Bank of Australia ahead of its August policy meeting. Official figures released on July 29 showed the consumer price index rose 4.0% in the June quarter from a year earlier, below the 4.1% forecast and down from 4.1% in the prior quarter. On a quarterly basis, prices increased 0.6%, a sharp slowdown from 1.4% in the March quarter. The closely watched trimmed mean measure of core inflation rose 3.6% year on year, down from 3.7% and below expectations. Separate monthly data showed headline inflation cooled to 3.8% in the year to June from 4.0% in May, with housing, food and recreation the largest contributors. The softer readings prompted several analysts to abandon their forecasts for further rate increases this year, and markets rapidly priced out the chance of a hike at the August meeting. The Australian dollar slipped following the data. The RBA's cash rate currently stands at 4.35%, and Governor Michele Bullock had reiterated the day before that policymakers remained ready to tighten further if inflation proved persistent.