Shock figure may be good news for millions of Aussies with a mortgage: Inflation comes in lower than expected

By AIDAN WONDRACZ, ASSISTANT NEWS EDITOR, AUSTRALIA Published: 02:44, 29 July 2026 | Updated: 02:59, 29 July 2026 Millions of Aussies bracing for another rate hike next month may have been given good news with inflation coming in lower than forecast at 3.8 per cent. Australian Bureau of Statistics data showed on Wednesday headline inflation slowed to 0.6 per cent in the June quarter from 1.4 per cent in April. The consumer price index fell from four per cent to 3.8 per cent. The trimmed mean - the Reserve Bank of Australia's preferred measure - held at 0.8 per cent in June and 3.6 per cent on an annual basis, beating expectations it would rise. 'When we look through some of the bigger price movements, underlying inflation is steady at 3.6 per cent in the 12 months to June 2026,' ABS head of price statistics Rachael McCririck said.    'This is the same as in the 12 months to May 2026.' Ahead of the release of the ABS data, pricing data from Bloomberg put the likelihood of a rate rise in August at 19 per cent. Now, money market traders have lowered the odds to 14 per cent. The cash rate is currently at 4.35 per cent, with the Reserve Bank to announce its decision on whether or not to raise it by another 0.25 per cent on August 11.  Core inflation - the Reserve Bank of Australia's preferred measure - held at 0.8 per cent in June Reuters data has also dropped the implied odds of a rate increase by the end of the year from 82 per cent to 64 per cent.  Global X ETFs senior investment strategist Marc Jocum said the latest inflation figures indicated a slowdown in momentum.  'The result was particularly significant given it followed last week's stronger-than-expected labour market data... instead, today's quarterly CPI showed the economy may be absorbing higher interest rates more effectively than feared,' he said. 'Just as importantly, it suggests some of the feared pass-through from higher oil prices, supply chain disruptions and geopolitical tensions has not meaningfully fed into broader consumer prices as much as initially thought.' Mr Jocum explained the Reserve Bank may be less encouraged to raise interest rates next month. 'Today's CPI suggests the long and variable lags of monetary policy may finally be beginning to bite, potentially feeding through to slower inflation without the Reserve Bank needing to tighten the screws further just yet,' he said.  BNY APAC macro strategist Wee Khoon Chong adopted a less optimistic outlook. 'The data reinforce the view that inflation remains sticky, rather than signalling a decisive disinflation trend,' he said. Ahead of the release of the ABS data, pricing data from Bloomberg put the likelihood of a rate rise in August at 19 per cent '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. 'Markets reacted negatively, with front-end yields falling and the Australian dollar weakening. We respect the price action but disagree with the initial assessment.  'Today's data are not compelling enough for the RBA to shift to a more dovish stance, and we therefore maintain a constructive outlook on the Australian dollar.' The Australian dollar dropped 0.3 per cent to 69.5 US cents.