SYDNEY — Australia's annual inflation rate cooled to 4.3% in the 12 months to May 2026, down from 4.6% in March, offering the first clear sign that the recent surge driven by global energy shocks may be peaking. The Australian Bureau of Statistics released the May Consumer Price Index data on Wednesday, showing headline CPI rising 0.8% in the month, with easing fuel prices providing some relief even as underlying pressures in housing and services remain sticky.

The trimmed mean measure of underlying inflation held at 3.4%, still well above the Reserve Bank of Australia's 2-3% target band. While the modest decline in headline inflation was welcomed by markets and households, economists caution that progress toward the target will likely be gradual, with the central bank expected to hold rates steady at 4.35% for the foreseeable future.

The data comes as the RBA navigates a complex environment of lingering global uncertainty from the U.S.-Iran conflict, domestic capacity constraints, and a resilient labour market. Governor Michelle Bullock has repeatedly stressed that inflation is "likely to stay above target for some time," a message reinforced in the central bank's latest Statement on Monetary Policy.

Key Drivers in May CPI

Fuel prices, the main culprit in the earlier spike, began to moderate in May as global oil markets stabilised somewhat following diplomatic efforts........

© International Business Times