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Australian consumer inflation hits 13-month low, raising chances of pause in rate hikes

Stella Qiu

SYDNEY (Reuters) – Australian consumer inflation slowed to monthly low in May as Sharp consumer inflation fueled a pullback in prices, while measures of core inflation also cooled, suggesting rates may not have to rise again in July.

Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index rose 5.6% in the year to May, the smallest gain since last April.

Down from 6.8% in the previous month and well below the market forecast of 6.1%.

On a monthly basis, the CPI fell by 0.4% in May. The core consumer price index (CPI) rose at an adjusted average annual rate of 6.1%, hitting a seven-month low and down again from 6.7% in April.

Investors reacted by sending the Australian dollar down 0.8% to $0. 30, while the market sees a July rate hike as less likely with a probability of % and bets on rates being more likely The uptick peaked at 4.30%, not 4.6%.

Reserve Bank of Australia sharply hikes interest rates 6632 basis points to 4.1% since May last year, but upside risks to inflation mean the central bank has taken a hawkish tone in recent months , warning that further rate hikes may be needed.

“The number is at the very low end of the range economists expect (6.9% to 5.6%) and is substantially weaker enough for the RBA to halt a series of rate hikes in July and possibly beyond, ’ he said. IG market analyst Tony Sycamore.

Wednesday’s data showed that the most important drivers were an 8.4% increase in housing and a 7.9% increase in food and non-alcoholic beverages. The rise was offset by an 8.0% drop in motor fuel prices.

Holiday travel, a closely watched measure of prices excluding volatility and volatility, slowed slightly despite a possible pause next week , fell to 6.4% from 6.5%, while a heavy jobs report raised the risk of further rate hikes.

“With the labor market still very tight, with unit labor cost growth soaring and the housing market rebounding strongly, we doubt the central bank will continue to hike rates next week,” said Marcel Thieliant ), senior economist at Capital Economics.

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