Mixed inflation data keeps August RBA meeting a 'live' one

Australia's Consumer Price Index (CPI) rose 3.8% in the 12 months to June, down from 4% in the 12 months to May 2026, according to the Australian Bureau of Statistics (ABS).

Housing came out to be the largest contributor to annual inflation for the month. Trimmed mean inflation remain unchanged for the month at 3.6%.

The inflation data was the last major economic data prior to the RBA's monetary policy meeting next month.

Speaking the Anika Foundation in Sydney, RBA governor Michele Bullock said since monetary policy operates with a lag, the full effects of this year's cash rate increases are yet to be felt.

"A key question in the period ahead is whether the tightening in monetary policy earlier in the year is sufficient to achieve this," she said.

Last week, Australian employment jumped by a substantial 76,300 jobs in June, above the market consensus of 15,000 jobs creation.

HSBC chief economist Paul Bloxham had noted the August RBA meeting will be a live one with the inflation jobs market still a little tight, despite being on a loosening trend.

First Sentier short term investments and cash senior portfolio manager Ben Samuel said: "Today's inflation print came in slightly below expectations and below the RBA's latest forecast, for both the headline and the trimmed mean series."

"Taken together with recent data and RBA commentary, a 'give it time' hold decision is likely for the RBA's next meeting in August. Markets have moved accordingly, with pricing now implying almost no chance of a hike in August, from around a 20% likelihood immediately prior to release."

BNY macro strategist for APAC Wee Khoon Chong said overall, the data reinforced the view that inflation remains sticky, rather than signaling a decisive disinflation trend.

"Combined with a resilient labour market and a buoyant equity market, the Australian economy remains on a solid footing. This should support the RBA's hawkish bias, although the data are not strong enough to justify a resumption of rate hikes," Khoon Chong said.

"Markets reacted negatively, with front-end yields falling and the Australian dollar weakening."

Bullock added the board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed.

Bullock added against a backdrop of ongoing global supply shocks, the board remains focused on preventing elevated cost pressures from entrenching inflation.

"This does mean that some further easing in the growth of demand is likely to be required if we're to bring inflation back down sustainably to target," she said.