Live Comments

Australia's inflation report offered further evidence that price pressures are gradually easing, strengthening the case for the Reserve Bank of Australia to remain on hold in August. Both the quarterly and monthly measures came in softer than expected, while underlying inflation remained below the RBA's own forecasts. The outcome supports Governor Michele Bullock's recent assessment that inflation is evolving broadly as anticipated and suggests there is little pressing need to resume tightening immediately after three rate hikes already delivered this year.

The quarterly figures, which carry the greatest weight for RBA policy, were particularly encouraging. Headline CPI unexpectedly fell -0.1% qoq in the second quarter, compared with expectations for a 0.7% increase, after rising 1.4% in the first quarter. Annual headline inflation slowed from 4.1% to 3.8%. More importantly, quarterly trimmed mean inflation—the RBA's preferred gauge of underlying price pressures—rose 0.8% qoq, below the 0.9% consensus and matching the pace recorded in the first quarter. On an annual basis, trimmed mean inflation edged up from 3.5% to 3.6%, but remained below both the 3.7% market consensus and the RBA's own 3.8% forecast published in May.

The monthly CPI indicator told a similar story. Headline CPI slowed from 4.0% yoy in May to 3.8% yoy in June, while monthly trimmed mean inflation held steady at 3.6% yoy, undershooting expectations for a rise to 3.7%. On a monthly basis, both the trimmed mean and weighted median increased just 0.3%, while prices excluding volatile items and holiday travel were unchanged. Tradable and goods prices each declined -0.8% mom during the month, extending the disinflation trend in imported goods. Services inflation remained firmer at 4.0% yoy, while non-tradables rose 4.9% yoy, indicating that domestically generated inflation continues to moderate only gradually.

Taken together, the report reinforces the view that the RBA's tightening bias remains intact but the urgency to act has diminished. Inflation remains above target, meaning policymakers are unlikely to declare victory. However, with both headline and underlying inflation coming in below expectations—and trimmed mean inflation also below the RBA's own forecasts—the data give the Board little reason to abandon June's pause and rush into another rate increase in August.

Economic Data

Quarterly CPI (Q2 2026)

Monthly CPI (June 2026)

Key Takeaways

• Australia's inflation report was softer than expected across both the quarterly and monthly measures. Headline and trimmed mean inflation all undershot market forecasts.
• Quarterly trimmed mean inflation—the RBA's preferred measure—rose 0.8% q/q and 3.6% y/y, below both market expectations and the RBA's own May forecast of 3.8%.
• The monthly CPI indicator reinforced the quarterly message, with headline CPI slowing to 3.8% y/y and monthly trimmed mean inflation holding at 3.6% instead of rising as expected.
• The details point to broader disinflation rather than just lower fuel prices. Prices excluding volatile items and holiday travel were flat in June, while tradable and goods prices both fell 0.8%.
• Housing remained the largest source of inflation, rising 6.8% y/y, driven by electricity (+22.4%) following the expiry of government rebates and new dwelling costs (+5.8%) as builders passed through higher labour and material costs.
• Services and non-tradables remain sticky, with annual inflation of 4.0% and 4.9% respectively, indicating domestic inflation pressures have eased only gradually.
• For the RBA, the report weakens the case for an August rate hike. The Bank's tightening bias remains intact, but inflation is evolving slightly better than expected, giving policymakers more room to assess the cumulative impact of previous tightening.

Full Australia CPI release here.

US consumer confidence weakened further in July as households grew less upbeat about current business conditions and the labor market, although easing inflation expectations offered a modest offset. The Conference Board's Consumer Confidence Index slipped -1.4 points to 90.8 from an upwardly revised 92.2 in June. The Present Situation Index fell -3.6 points to 114.9, marking its third consecutive monthly decline, while the Expectations Index held steady at 74.7—well below the 80 level that has historically been associated with recession risks.

The latest survey suggests consumers remain unconvinced that economic conditions will improve meaningfully in the months ahead. According to Dana M. Peterson, Chief Economist at The Conference Board, confidence has continued its gradual downtrend since late 2021 as assessments of current business conditions and, to a lesser extent, the labor market deteriorated further. While expectations for future employment became slightly less pessimistic, consumers continued to anticipate little improvement in overall business conditions over the next six months. Household income expectations also moderated, although they remained positive overall.

There were, however, some encouraging signs beneath the headline figures. Both average and median 12-month inflation expectations eased in July, suggesting consumers are becoming somewhat less concerned about future price pressures. Even after recent market volatility, households continued to expect stock prices to rise over the coming year. Meanwhile, 61.3% of respondents still anticipated higher interest rates over the next 12 months, unchanged from June, indicating consumers remain prepared for monetary policy to stay restrictive even as confidence gradually softens.

Economic Data

Key Takeaways

• Consumer confidence fell for a second straight month, extending the gradual downtrend that has been in place since late 2021.
• The decline was driven by weaker assessments of current business conditions and the labor market, with the Present Situation Index falling for a third consecutive month.
• The Expectations Index remained at 74.7, below the 80 threshold that has historically been associated with recession risks, suggesting consumers remain cautious about the economic outlook.
• Consumers expect little improvement in business conditions over the next six months, although labor market expectations became slightly less pessimistic.
• Inflation expectations eased further, indicating households are becoming less concerned about future price pressures.
• Despite recent equity market volatility, consumers continued to expect stock prices to rise over the next year.
• A majority (61.3%) still expect interest rates to move higher over the coming 12 months, highlighting expectations that monetary policy will remain restrictive.

Full US Conference Board consumer confidence release here.

Speaking in Sydney today, Reserve Bank of Australia Governor Michele Bullock reaffirmed that the Board remains firmly focused on restoring price stability while leaving the door open to further monetary tightening if inflation proves more persistent than expected. Although she acknowledged that "the global environment has changed and the outlook is uncertain," Bullock stressed that the RBA's objectives "haven't changed," with the Board remaining committed to delivering both price stability and full employment. She also emphasized that the full effects of the cash rate increases delivered earlier this year "will take time to materialize," making it too early to judge whether existing policy settings are sufficiently restrictive.

Bullock warned that even if the latest disruption to global oil supplies proves temporary, inflation risks have not disappeared. She noted that "underlying inflation is still expected to be higher as fuel price rises flow through to other prices," while reminding markets that "inflation and capacity pressures in the domestic economy were already too high prior to the recent shock." Although there is evidence that domestic demand and labor market conditions have been easing, she argued that the economy continues to face significant capacity constraints and that the Board remains focused on "preventing elevated cost pressures from entrenching inflation."

While acknowledging that further moderation in demand may still be required, Bullock stopped short of signaling an imminent policy move, instead framing the coming months as a test of whether earlier tightening will be sufficient. She reiterated that monetary policy cannot solve Australia's weak productivity growth, but can make its greatest contribution by maintaining "low and stable inflation" alongside sustainable full employment. The speech nevertheless preserved the RBA's tightening bias, with Bullock concluding that the Board "is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed."

Key Takeaways

• Policy stance: RBA retains a conditional tightening bias and remains prepared to raise the cash rate again if inflation proves persistent.
• Policy lags: Bullock emphasized it is too early to judge whether the earlier rate hikes have been sufficiently restrictive, as their full effects are still working through the economy.
• Inflation: Even if oil supply disruptions ease quickly, higher fuel prices are expected to lift underlying inflation through broader cost pass-through.
• Domestic economy: Demand and labour market conditions are cooling, but capacity pressures remain elevated and inflation was already too high before the latest oil shock.
• Long-term challenge: Weak productivity continues to constrain Australia's non-inflationary growth potential, a problem monetary policy cannot solve.
• Market implication: The speech pushes back against expectations of an early policy pivot and reinforces the RBA's data-dependent tightening bias.

Full speech of RBA's Bullock here.