Australia’s consumer inflation hits 13-month low, adding to rate pause case

Australia’s consumer inflation slowed to a 13-month low in May, driven by a sharp pullback in fuel, while a measure of core inflation also cooled in a sign interest rates might not have to rise again in July.

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

That was down from 6.8% the previous month and well below market forecasts of 6.1%.

On a monthly basis, CPI fell 0.4% in May. The core trimmed mean measure of CPI rose by an annual 6.1%, a seven-month low and again down from 6.7% in April.

Investors responded by pushing the Australian dollar down 0.8% to $0.6632, while markets moved to price in a lower chance of a hike in July, with a 30% probability, and wagered that rates are more likely to peak at 4.35%, rather than 4.6%.

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