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Australia's Headline Inflation Eases in June, Supporting Case for Interest Rate Hold

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Australia's Headline Inflation Eases in June, Supporting Case for Interest Rate Hold

Australia's annual pace of inflation eased more than expected in June, potentially cooling near-term expectations for an interest rate hike, even as rising housing costs continued to weigh on the reading.

The country's consumer price index rose 3.8% in the 12 months to June, down from a 4% rate logged in May, data from the Australian Bureau of Statistics showed on Wednesday.

The closely watched annual trimmed mean inflation, which removes outliers on the low and high end of price movements, was unchanged from the previous month at 3.6% in June.

Westpac expected a June CPI of 4.2% and a trimmed mean inflation reading of 3.7%. BofA Securities, which forecast headline CPI at 3.9%, recently said any downside surprises to its estimate should support the case for Australia's central bank to keep borrowing costs unchanged at an upcoming policy meeting in August.

Housing was the largest contributor to annual inflation in June with a rise of 6.8%, reflecting elevated electricity costs that are over 22% higher than they were a year earlier following the end of government rebate programs.

"Annual inflation for new dwellings has reached its highest level in almost three years, at 5.8%," said Rachael McCririck, head of price statistics at the ABS. "This was driven by builders passing on higher material and labor costs."

The data also showed a moderation in annual inflation for transport to an increase of just 0.1% in June from a 3.3% rise in May as automotive fuel prices declined for three straight months.

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