Annual inflation in Australia fell to 4.0% in May, below forecasts, but core inflation remains above the RBA’s target range.
Australia’s annual inflation rate eased to 4.0% in May, down from 4.2% in April, marking the lowest reading since early 2025. The figure undershot market expectations of 4.4% but stayed above the Reserve Bank of Australia’s 2-3% target range.
Core inflation pressures remained sticky, complicating the RBA’s policy outlook. Analysts had anticipated a smaller decline, with consensus forecasts centered on a 4.3% print. The slowdown was driven by moderating goods prices, though services inflation showed resilience.
Markets are now pricing a lower probability of further RBA rate hikes this year, though policymakers may remain cautious given persistent underlying inflation.