The Australian dollar and bond yields experienced declines following the release of data indicating a slowdown in quarterly inflation. For the three months leading up to June, inflation was reported at 2.1 per cent, falling short of anticipated forecasts. This development has prompted adjustments in market expectations regarding the Reserve Bank of Australia’s (RBA) upcoming policy decisions.
In response to the inflation data, the Australian dollar edged lower, reaching US65¢, a decrease from its previous level of US65.32¢. Concurrently, the bond market reacted with notable shifts. The widely monitored three-year bond rate decreased by 7 basis points, settling at 3.35 per cent. Similarly, the 10-year bond rate saw a reduction of 3 basis points, moving to 4.27 per cent.
These movements reflect a recalibration of expectations among traders concerning the RBA’s next policy meeting. Money markets are now pricing in an August rate cut with near certainty. The central bank’s response to the subdued inflation figures will be closely watched by investors and economists alike, as they assess the broader implications for the Australian economy. Any official statements from the RBA will provide further insights into the future direction of monetary policy.
