Fresh hope for hold on rates as inflation sinks to surprise low

Consumer prices have softened by more than expected, falling to 4.9 per cent in the 12 months to July.
The surprise data, released on Wednesday, offers fresh hope the Reserve Bank will continue its pause on official interest rates when it next meets on Tuesday.
In June, the Australian Bureau of Statisticsâ monthly consumer price index grew 5.4 per cent.
Markets were expecting a 5.2 per cent annual lift in inflation through to July, with the rate of growth in the consumer price index continuing to pull back from its peak of 8.4 per cent in December.
ABS head of prices statistics Michelle Marquardt said the fall was more modest when volatile prices changes in automotive fuel, fruit and vegetables, and holiday travel were stripped out.
âWhen excluding these volatile items, the decline in annual inflation is more modest at 5.8 per cent in July, compared to 6.1 per cent in June,â Ms Marquardt said on Wednesday.
Housing was among the biggest contributors to the annual increase in July. It was up 7.3 per cent, with food and non-alcoholic beverages lifting 5.6 per cent annually.
Offsetting the rise was a 7.6 per cent fall in automotive fuel.
The monthly index is considered more volatile than its quarterly counterpart. It is also less comprehensive, with some price data only available quarterly.
Loan comparison website Rate City said the latest figures were âall but ruling out a rate hikeâ in September.
âInflation is now coming down nicely. At an annual rate of 4.9 per cent, itâs still too high, but the data is tracking in the right direction,â research director Sally Tindall said.
âThe third pause in as many months, if it materialises, will be welcome news for borrowers, but it wonât provide any relief for the households already up against the ropes.â
Ms Tindall said most households had only just started paying for the last rise in official interest rates, imposed in June.
âThe squeeze on household finances is likely to continue well into next year,â she said.
âWhile thereâs a chance weâre already at the peak, itâs impossible to rule out further hikes altogether.
âIf youâve got a mortgage, plan for at least one more hike. If it doesnât materialise, then youâll be able to pocket the extra cash, ideally back into your mortgage.â
The RBA has jacked up interest rates in response to fast-rising inflation but has left the cash rate on hold for two consecutive months, fuelling speculation the tightening cycle is over.
However, it has also kept the option of further increases on the table and will be alert to any signs of persistent inflationary pressures that may suggest more work remainâs to be done.
Despite the recent lower figures, inflation remains much higher than the RBAâs 2-3 per cent target range.
Data from the construction sector was also released by the bureau on Wednesday, revealing a 0.4 per cent increase in total completed construction work.
The total number of dwellings approved fell 8.1 per cent in July.
Next Tuesday will be outgoing RBA governor Phil Loweâs final meeting as the central bankâs boss. He will be replaced by deputy governor Michele Bullock in September.
â with AAP








