Australia Q2 CPI rises 0.6%, below 0.7% consensus

Australia's June-quarter inflation data showed broader-than-expected easing in price pressures, reducing immediate pressure on the Reserve Bank of Australia to tighten policy again soon. Headline CPI rose 0.6% quarter-on-quarter, below the 0.7% consensus, slowing from 1.4% in the first quarter, while annual headline inflation eased to 4.0% from 4.1%. For June alone, CPI fell 0.1%, taking the yearly rate to 3.8%. The closely watched trimmed mean measure of core inflation rose 0.8% in the quarter, below the 0.9% consensus forecast, while the annual pace edged up to 3.6% from 3.5% in the March quarter but remained below both the 3.7% market estimate and the RBA's 3.8% projection. After the data, traders sharply cut expectations for another RBA increase, with the implied probability of a rate hike at the August 11 meeting falling to 4% from 21% before the release; later pricing suggested almost no chance of an August move and only roughly even odds of a hike by December. The Australian dollar initially fell 0.4% to $0.6949 and three-year government bond yields dropped 10 basis points to 4.479%, but the currency later rose above $0.70 to a six-week high as softer U.S. inflation, the Federal Reserve's decision to leave rates unchanged, and suspected yen-support intervention by Japanese authorities weighed on the U.S. dollar. RBA officials said the inflation reading was slightly softer than expected, but warned that persistent housing and services inflation and a still-tight labour market could keep the policy outlook cautious.