Australian Inflation Gives New Indications For RBA Policy

<p>&nbsp;Inflation in Australia continued to show a decline in July which indirectly means that interest rates do not need to go higher.</p><p><br /></p><p>Most recently, Australia's consumer price index (CPI) was reported to have increased 4.9% year-on-year last month, down from the 5.4% reading recorded in June. It also fell short of expectations to increase by 5.2%.</p><p><br /></p><p>This post is also a decline for the third month in a row, with Australia's central bank (RBA) predicting inflation will return to its 2-3% target by the end of 2025.</p><p><br /></p><p>Meanwhile, on a monthly basis, CPI rose 0.3% in July, bringing the three-month annualized rate to 2.8%, which is within the RBA's target range.</p><p><br /></p><p><br /></p><p>The central bank has raised interest rates by 400 basis points to an 11-year high of 4.1% since May last year.</p><p><br /></p><p>The RBA then decides to look at or rely on incoming economic data to determine the next policy setting.</p><p><br /></p><p>Following this latest reading of inflation, investors are placing expectations that the central bank is likely to keep interest rates unchanged at its next policy meeting.</p><p><br /></p><p>The initial reaction of the Aussie dollar showed the currency to have weakened slightly, but it has pared losses to trade steady at around 0.6473 against the greenback, at the time of writing.</p>