Australia’s July CPI is forecast to ease to 3.3% y/y, reinforcing expectations of an extended RBA pause amid softer labor conditions.
Australia’s July Consumer Price Index is expected to show headline inflation easing to 3.3% year-over-year from 3.8% in June, while trimmed mean inflation is projected at 3.5% y/y, down from 3.6%. The data aligns with cooling labor market conditions and softer wage growth, reducing pressure on the Reserve Bank of Australia to hike further.
The RBA’s August meeting minutes and Q2 private capital expenditure data, due this week, will shape rate expectations. Futures markets currently price a 60% chance of one more 25bps hike by year-end, though risks lean toward an extended pause as policy remains restrictive. The RBA targets trimmed mean inflation, which it expects to decline to 3.3% by December.
Despite the pause narrative, the AUD remains supported by attractive carry and commodity exposure, offsetting near-term downside risks.