SYDNEY- Australia’s consumer inflation slowed to a 13-month low in May, driven by a sharp pullback in fuel, while a measure of core inflation also cooled in a sign interest rates might not have to rise again in July.
Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose 5.6 percent in the year to May, marking the smallest increase since April last year.
That was down from 6.8 percent the previous month and well below market forecasts of 6.1 percent.
On a monthly basis, CPI fell 0.4 percent in May. The core trimmed mean measure of CPI rose by an annual 6.1 percent, a seven-month low and again down from 6.7 percent in April.
Investors responded by pushing the Australian dollar down 0.8 percent to $0.6632, while markets moved to price in a lower chance of a hike in July, with a 30 percent probability, and wagered that rates are more likely to peak at 4.35 percent, rather than 4.6 percent.
The Reserve Bank of Australia has raised interest rates by a whopping 400 basis points to 4.1 percent since May last year, but the upside risks to inflation meant the central bank has adopted a hawkish tone in recent months, warning that more rate rises may be required.
“The number is at the very lower end of the range of economists’ expectations which ranged from 6.9 percent to 5.6 percent and is soft enough by a good margin to see the RBA halt its series of rate hikes in July and possibly beyond,” said Tony Sycamore, market analyst at IG. – Reuters
