Australian annual inflation slowed to 3.8% in June, below forecasts, reducing odds of an August RBA rate increase to 4%.
Australian inflation unexpectedly declined 0.1% month-over-month in June, pushing the annual rate down to 3.8%, its lowest in four months. The softer print sharply lowered market expectations for an August Reserve Bank of Australia rate hike, with implied odds dropping to 4% from over 20% the prior day.
Analysts had anticipated a 0.2% monthly rise, but weaker price pressures across key categories prompted the surprise dip. Services and non-tradable inflation remain elevated, however, complicating the outlook for further policy moves.
The Australian dollar weakened following the data release, reflecting reduced tightening bets. Commerzbank expects the RBA to hold rates steady in August and sees no further hikes this year amid oil price volatility.