The Reserve Bank of Australia is likely to remain in wait-and-see mode on interest rates following solid inflation figures.

The cost of living in Australia rose 0.5 per cent to 3 per cent in the June quarter, largely in line with expectations.

The Australian Bureau of Statistics figures released this morning showed housing, medical and tobacco pushed the cost of living up, while there was fall in spending for domestic travel, fuel and telecommunications services.

The Australian dollar rose above 94 US cents following the slightly softer than expected inflation figures.

At 11.36 AEST the Australian dollar was trading at 94.34 US cents, up from to 93.90 US cents before the data was released.

CPI is rising at the fastest rate in 2.5 years as the June quarter gain pushes inflation to the top of the Reserve Bank’s target range of two to three per cent. The index rose 0.6 per cent in the March quarter.

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The figures ruled out the chance of a rate cut in the near future, JP Morgan economist Tom Kennedy said.

“Over the past four to six weeks we have seen some speculation that the RBA could potentially be firming up their easing bias and speculation that rate cuts could be forthcoming,” Mr Kennedy said.

“Given quite a solid core print, we think that speculation is likely to be dialled back in market pricing a fair bit so, for us, there should be no change here for the RBA.”

The trimmed mean CPI rose 0.8 per cent in the June quarter, for an annual growth rate of 2.9 per cent.

The weighted median CPI rose 0.6 per cent in the June quarter, for an annual rise of 2.7 per cent.

CBA cuts fixed rates

The Commonwealth Bank has cut its five-year fixed interest rates to a record low of 4.99 per cent.

CBA announced this morning it would cut the five-year by 0.7 percentage points, making it the lowest rate on the market.

It is also the first time the country’s biggest lender’s fixed five-year rate has fallen below five per cent.

The cuts come as new figures reveal the big four banks have gained market share in mortgages in the past year, the Australian Financial Review reports.

A report by mortgage broker AFG shows while several small and regional bank lenders have increased their share of the company’s mortgages, others have lost market share.

Loans by small lenders reached a high in November last year at 27.7 per cent, but have now fallen to 25.5 per cent compared to 26.3 in July last year.

– with AAP