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RBA Expected to Keep Rates Unchanged in August After Softer-than-Expected June Quarter Trimmed Mean Inflation Data, ANZ Says

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The softer-than-expected June quarter trimmed mean inflation print of 0.8% should see the Reserve Bank of Australia (RBA) keep rates on hold at 4.35% at its August meeting, ANZ Research said in a note on Wednesday.

Trimmed mean inflation was lower than expected at 3.6% on an annual basis, compared with the RBA's forecast of 3.8%. The central bank governor acknowledged the softening in economic activity in a speech on Tuesday.

Australia's consumer price index (CPI) rose 3.8% in the 12 months to June from a 4% increase in the year to May. The largest contributor to annual inflation was housing, which rose 6.8%, followed by food and non-alcoholic beverages and recreation and culture, both up 3.3%.

The RBA is forecast to ease rates by 50 basis points in the second half of 2027, ANZ said, adding that the risk of a rate hike in November remains.

The monthly CPI showed signs that second-round passthrough is limited so far, with new dwelling costs increasing just 0.4% on a monthly basis in June after lifting 0.9% in May and 0.7% in April. The food group also recorded softer monthly growth in June at 0.4%.

The lender concluded that there are signs that the demand environment is making it challenging for businesses to pass on higher costs to households.

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