ISCOVER
Trimmed mean inflation has fallen to remain within the RBA’s target band of 2–3 per cent for a second consecutive quarter, raising hopes for an interest rate drop in August.
Underlying annual inflation has eased to 2.7 per cent for the June quarter, down from 2.9 per cent in the March quarter to reach its lowest level since December 2021.
New Consumer Price Index (CPI) data released by the Australian Bureau of Statistics (ABS) showed that trimmed mean annual inflation eased over the June 2025 quarter, remaining within the Reserve Bank of Australia’s (RBA) 2–3 per cent target range for a second consecutive quarter and raising hopes of an interest rate cut in August.
The annual trimmed mean of inflation is one of the figures the RBA is most interested in when setting the official cash rate.
Annual CPI inflation was 2.1 per cent in the June quarter, down from 2.4 per cent in the March quarter and marking the lowest annual inflation rate since the March 2021 quarter.
Price rises for new dwellings (up 0.7 per cent), rents (rising 4.5 per cent), and insurance (up 3.9 per cent) continued to slow over the year.
The CPI rose 0.7 per cent this quarter and over the 12 months to the June 2025 quarter increased 2.1 per cent.
The most significant price rises this quarter were housing (up 1.2 per cent), food and non-alcoholic beverages (up 1.0 per cent), and health (up 1.5 per cent). The increase was partially offset by the rise in transport (down 0.7 per cent).
Annual services inflation fell to its lowest level since June 2022, easing to 3.3 per cent from 3.7 per cent in the March quarter.
Commenting on the data, Michelle Marquardt, ABS head of prices statistics, said: “The CPI rose 0.7 per cent in the June quarter, lower than the 0.9 per cent rise in the March 2025 quarter.
“Annual inflation to the June 2025 quarter of 2.1 per cent was down from 2.4 per cent to the March quarter. This is the lowest annual inflation rate since the March 2021 quarter.”
The latest inflation figures are likely to broadly support the case for a rate cut in August, with major bank economists generally expecting the RBA to drop rates.
Following the CPI data's release, all four majors reaffirmed their expectations for an interest rate cut next month.
Reflecting on the inflation report, Westpac chief economist Luci Ellis said: “The RBA Monetary Policy Board (MPB) in July opted to wait for more confirmation that inflation is on track to return to the midpoint of the 2–3 per cent target range and stay there. That confirmation has now come with the full June quarter CPI data.
“We therefore expect the MPB to cut rates by 25bps at its August meeting, to 3.6 per cent. Further cuts in November, February 2026 and May 2026, also look increasingly likely. Today’s data removes any awkwardness posed by inflation remaining too high for the RBA’s comfort.”
Earlier this month, the RBA surprised many by holding the official cash rate level at 3.85 per cent.
The latest quarterly inflation figures are likely to highly influence the next rate decision, which will take place on 12 August.
Indeed, in the post-meeting press conference following the central bank’s July cash rate announcement, RBA governor Michele Bullock highlighted the board was “waiting to confirm” if quarterly inflation was “still on track to meet inflation and employment objectives”.
[Related: RBA surprises with cash rate decision]
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