Sydney: Because of government rebates on electricity bills, Australian inflation slowed to a four-month low in July. However, the lack of progress in curbing price increases abroad dampened market expectations of a near-term interest rate cut.
The annual growth rate of the consumer price index (CPI) decreased to 3.5% in July from 3.8% in June, according to data released on Wednesday by the Australian Bureau of Statistics.
Because the number was marginally higher than expected (3.4%), markets extended the odds of the Reserve Bank of Australia’s first easing to 48.4% in November from the previous 58%. The Australian dollar reached its highest point of the year, $0.6803, up 0.1%, and $0.6803, about the highest this year.
The inflation estimate for July is deceptive and full of smoke. According to Moody’s Analytics economist Harry Murphy Cruise, “at face value, the fight against inflation looks to have made significant progress, but some of that improvement came from rebates that artificially lowered the cost of electricity.”
Prices remain the same in the end, even though that greatly improves the headline inflation figure. The CPI excluding volatile items and holiday travel dipped to 3.7 per cent, the lowest reading since early 2022, compared with 4.0 per cent.
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