Australian core inflation drops to 3.5-year low, signaling potential rate cut in July

From Yahoo Finance: 2025-06-24 22:20:00

Australian consumer price inflation slowed more than expected in May, with the monthly consumer price index rising 2.1% compared to a year earlier, down from 2.4% in April. The trimmed mean measure of core inflation hit a three-and-a-half-year low of 2.4% in May, below the 2-3% target band.

Investors are now anticipating a 92% probability of a quarter-point rate cut from the Reserve Bank of Australia on July 8, up from 81% before the data release. Commonwealth Bank of Australia, Deutsche Bank, and TD Securities adjusted their rate cut calls to July, while UBS is reviewing its prediction for the RBA to hold rates steady.

Economists believe a rate cut in July is necessary to maintain growth, as inflation is no longer a concern. With the economy barely growing in the first quarter due to consumer caution amidst global trade risks, investors expect a total easing of 78 basis points by the end of the year.

Services inflation slowed to 3.3% annually, rents rose 4.5%, and new dwelling prices remained flat in May. Holiday travel and accommodation prices fell 7%, following a 6% rise in April. The labor market remains stable, with the unemployment rate at 4.1% and job advertisements above pre-COVID levels.



Read more at Yahoo Finance: Australia’s core inflation hits 3-1/2-year low, greenlighting July rate cut