Australia's core inflation eased in the second quarter of 2024, providing some relief to the Reserve Bank of Australia (RBA) ahead of its next interest rate decision. The RBA's preferred measure of underlying inflation, the trimmed mean, rose 0.8% in Q2 2024 and stood at 3.6% annually in June 2024.
The headline consumer price index (CPI) rose 3.8% in the year to June 2024, down from 4.0% in May. The Q2 figure came in below market expectations, according to reports.
Falling fuel costs helped pull headline inflation lower. The Australian Bureau of Statistics (ABS) reported that fuel prices dropped 10.9% in June 2024. ABS head of prices statistics Rachael McCririck attributed the decline to lower world oil prices.
Despite the cooler core reading, inflation remains well above the RBA's 2-3% target. Services inflation stayed persistent, and the RBA has signaled it is prepared to raise rates further if new inflationary pressures emerge. RBA Governor Michele Bullock said the bank is 'prepared to act as required.'
Financial markets responded by cutting the probability of a rate hike at the August meeting to near zero. Deloitte Access Economics partner Stephen Smith remarked that households and businesses will breathe a sigh of relief. The trimmed mean had peaked at 6.8% in December 2022. The RBA last raised the cash rate three times in 2023 (February, March, and May).
The Australian dollar faced some selling pressure after the data, with the AUD/THB pair finding support at 23.21 and targeting 23.34-23.36, according to some analysts. Meanwhile, oil prices briefly surged above US$100 a barrel in July 2024.