Better-than-expected inflation figures ease pressure on RBA in Australia

The Q2 inflation figures suggest underlying price pressures are less intense than initially feared. Annual trimmed mean inflation rose less than expected, with quarterly growth unchanged from Q1 and lower than the second half of last year. Meanwhile, headline inflation eased to 3.8% y/y in June, down from 4% in May and a peak of 4.6% in March.

The better-than-expected figures will likely keep the Reserve Bank of Australia on hold when it meets next month. Still, capacity constraints remain a concern, especially given the mammoth data centre investment pipeline. At best, those pressures will keep rate cuts off the table for some time. At worst, they could force further hikes later this year as the investment boom squeezes capacity in the non-AI parts of the economy.

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