Today’s inflation figures showed inflation pressures have eased, just a day after the Reserve Bank of Australia (RBA) warned inflation was still too high.

The Australian Bureau of Statistics reported the consumer price index (CPI) rose 3.8% in the year to June, down from 4.0% in the year to May. The RBA’s preferred measure of underlying inflation, the trimmed mean, was steady at 3.6%.

(The trimmed mean shows core inflation after excluding or “trimming” away the items with the largest price rises or falls, leaving the weighted average of the middle 70% of items.)

This is the most important piece of domestic economic data the RBA will receive before its next interest rates meeting on August 10–11.

Financial markets cut the chances of a rate rise next month to close to zero after the softer-than-expected inflation report. But there is still a meaningful chance of one more rate rise later in the year if inflation risks rise.

How the picture has changed since June

The largest contributors to annual inflation were housing (up 6.8% in the year), food and non-alcoholic beverages, and transport. The largest monthly decline was in automotive fuel prices in June, as global oil prices fell.

Services inflation remained persistent, particularly in housing-related categories such as rents. This suggests........

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