Yesterday we had better-than-expected (headline) inflation data from Australia:
This trimmed back expectations for a rate hike from the Reserve Bank of Australia at their next meeting, coming up on July 4. Not everyone shares that assessment though:
MUFG note that Australian headline inflation slowed more than expected, dropping even further below the peak from the end of last year at 8.4%.
And say that while the RBA will be pleased by the more significant drop in the headline rate, underlying details in the May month data were not as favourable.
- Core inflation measures have peaked but they remain too high.
- The trimmed mean measure of core inflation slowed by 0.6ppt to an annual rate of 6.1% as it moved further below the peak from December at 7.2%.
MUFG are still expecting a further rate hike from the RTBA but say the Bank “could now choose to skip next week’s policy meeting and leave rates on hold until the following meeting in August“.
And for AUD:
- Overall, it is a further near-term setback for the Australian Dollar which has been correcting lower since the middle of the month.