Australia's inflation rate falls to 3.5% in year to July as energy costs fall | Australian economy

Inflation has fallen to its lowest level since March, partly due to a 5% cut in electricity prices, when billions of euros were used as a result of government rebates.

Consumer prices fell by 3.5 percent in the year to July, the Australian Bureau of Statistics said on Wednesday.

In comparison, the rate in June was 3.8 percent, and economists had expected a rate of 3.4 percent for July.

The slower rise in petrol prices, which rose only 4.0 percent in the year to June (compared to 6.6 percent), helped reduce travel costs and overall inflation to the Reserve Bank's target of 3 percent.

However, prices fell less than expected, suggesting that it will be months before interest rate cuts occur.

Economists had expected interest rates to be 3.4% or lower in July, leading markets on Tuesday to expect the Reserve Bank to cut its key interest rate in December.

Reserve Bank Governor Michele Bullock warned in early August that inflation was still “too high” and falling too slowly to justify a rate cut by the end of the year.

The Australian dollar rose to 68 US cents for the first time since early January, reflecting increased investor confidence that interest rates will remain at 12-year highs in the coming months.

The easing of price pressure was largely expected due to government rebates on energy bills that came into force on July 1.

More details coming soon…