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Underlying inflation in Australia in Q2 was softer than expected, including by the RBA.
Trimmed mean inflation in monthly, quarterly and year-ended terms for both June and Q2 was ~0.1ppts below our nowcasts. Much of the downside surprise related to weaker-than-expected travel inflation in June.
We continue to expect the Board to keep the cash rate unchanged in August but maintain a hawkish bias given underlying inflation remains above target. Market pricing for an August hike evaporated post-CPI.
1. Australia’s CPI for the month of June fell 0.1% m/m in both original and seasonally adjusted terms. This was softer than our nowcasts for small increases.
In 3-month average terms, headline inflation was +0.6% q/q in Q2 in both original and seasonally adjusted terms. These were slightly lower than our nowcasts.
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