FX.co ★ Australia Inflation Expectations Retreat from 2-Year High

Consumer inflation expectations in Australia reduced to 4.7% in July 2025, down from June's two-year high of 5.0%. This change indicates a more balanced perspective on inflation risks, despite the continued strength of the labor market. However, it remains uncertain if this adjustment signifies a lasting trend. In the first quarter of 2025, annual inflation maintained a steady rate of 2.4%, marking a four-year low, which has persisted for the third straight quarter. Concurrently, the trimmed-mean Consumer Price Index (CPI)—the core measure preferred by the Reserve Bank of Australia—registered at 2.9%. Although this is the lowest level since late 2021, it remains above the RBA’s target midpoint of 2–3%. In May, the monthly CPI increased by 2.1% year-on-year, marking its slowest rate since October 2024. The Reserve Bank of Australia has indicated that it will await further data before concluding whether inflation is securely on the path to returning to its 2.5% target sustainably.