SYDNEY: Australian consumer price inflation accelerated in the June quarter as housing and food costs climbed, but core inflation surprised on the downside and greatly lessened the risk of another rise in interest rates.
Data also showed retail sales topped forecasts in June but sales volumes for the second quarter still declined, suggesting tight monetary policy is working to constrain consumer demand.
The Australian dollar fell 0.6% to $0.6497, a three-month low, three-year bond futures rallied 19 ticks to 96.24 and interbank bill futures for August priced out the chance of another hike in interest rates.
Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 1.0% in the June quarter, matching market forecasts.
CPI inflation picked up to 3.8% in the second quarter from a year earlier, up from 3.6% in the first quarter, in line with expectations. For June alone, CPI also rose 3.8% compared to the same month a year earlier.
A closely watched measure of core inflation, the trimmed mean, rose 0.8% in the second quarter from the previous quarter, under forecasts of 1.0%. The annual pace slowed to 3.9% from 4.0%, the lowest since early 2022.
The Reserve Bank of Australia has left interest rates at 4.35% for five straight meetings but policymakers were pondering whether the current policy is restrictive enough after earlier inflation data showed limited progress in cooling prices.
However, the bar to hike has been high given the RBA's worries of a sharp slowdown in the labour market. The jobless rate edged up to 4.1 per cent in June, consumers have reined in discretionary spending and economic growth came to a virtual halt.
New electricity rebates from the government are set to sharply lower price pressures in the third quarter, analysts say.