Australian Inflation Eases in the Second Quarter, Easing Pressure on the RBA

Australia's inflation cooled by slightly more than forecast in the second quarter, giving the Reserve Bank of Australia room to stay patient before its next policy decision. Data from the Australian Bureau of Statistics showed annual headline inflation easing to about 3.9% from 4.1% in the previous quarter, while the trimmed mean, the central bank's preferred gauge of underlying price pressure, slowed to 3.6% year on year, below expectations. On a monthly basis, June inflation dropped to a four-month low of 3.8%, driven by softer goods prices as transport costs rose only marginally on falling fuel prices; housing and services inflation, however, remained firm. RBA Assistant Governor Sarah Hunter described the quarterly reading as a touch softer than expected, noting that underlying pressures from housing and services are proving persistent and that the labour market remains tight. The central bank's cash rate stands at 4.35%, with the next decision due in mid-August. Economists at major banks expect the RBA to keep rates on hold, with the softer data reducing the case for any near-term increase.