Australia May CPI Mixed as Core Hits 3.6%, Hawkish RBA Tilt

Australia’s May CPI release on June 24 delivered a mixed inflation picture that tilted markets hawkishly. Headline inflation cooled to 4.0% y/y, below the 4.3% forecast, yet the trimmed-mean core measure accelerated to 3.6%, exceeding expectations and prior prints. This followed June’s flash PMI improvement to 49.8, which showed activity nearing stabilization but was undermined by four straight months of falling new orders and the weakest business confidence since March 2020. Markets responded by pricing a 36% chance of an August RBA hike and 67% for December, leaving the Australia 200 outlook dependent on upcoming labor data.