Shares hit five-month high; inflation eases to 6pc, below expectations

EY’s chief economist Cherelle Murphy says today’s inflation data gives the Reserve Bank cause for optimism that inflation may be contained with no more rate increases.

“We knew today’s Consumer Price Index (CPI) data for the June quarter was going to show disinflation, because goods inflation has fallen. More uncertain, though, was what would happen to services prices given the ongoing strong demand for dining out and overseas holidays, rising rents and higher wages growth,” Murphy says.

“Goods inflation did duly slow, falling to 5.8 per cent in the year to the June quarter, from 7.6 per cent in the year to the March quarter. But services inflation rose to an annual pace of 6.3 per cent, from 6.1 per cent in the year to the March quarter – with sharply higher prices for rents, restaurant meals, holiday travel and insurance over the past year.

“But what matters more is the quarterly profile, and it showed services inflation slowing from 2.1 per cent in the December 2022 quarter, to 1.7 per cent in the March quarter, to 0.8 per cent this quarter.”