Australia Watch: June CPI preview: Inflation undershoots, likely keeping RBA on hold

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Australia Watch: June CPI preview: Inflation undershoots, likely keeping RBA on hold

partial (16c/litre) unwind of the fuel tax relief (Exhibit 7).

Fuel-related spillovers less than feared in 2Q

Headline inflation in 2Q should be significantly below the 4.3-5.5% forecast range by SA: Seasonally adjusted

economists in May, reflecting surprisingly modest fuel-related spillovers, for example in NSA: Non-seasonally adjusted

food and travel inflation (Exhibit 4). While escalation in the Middle East and further

spillovers are an upside risk for 3Q, easing capacity pressures will at least partially offset

this. Housing inflation remains firm, with rents (0.4%) and new dwelling costs (0.5%)

rising at a solid pace in June, although the acceleration in new dwelling inflation during

2Q should ease from 3Q alongside the rapid slowdown in housing activity (Exhibit 8). For a complete list of our open trade

Market services inflation should ease to 0.3% m/m, and while it remains elevated at recommendations, as well as our

4.0% y/y, monthly momentum has slowed materially since late 2025 (Exhibit 5). trade recommendations closed over

Consumer durables likely eased in 2Q, and should soften further in 3Q (Exhibit 10). the last 12 months, see Global Rates

Rates/FX: Risks lean to cheaper front-end OIS Weekly: VAR: inflation offside 17 July

2026RBA OIS pricing has shifted materially following a strong jobs print and the rebound in

Brent crude above US$100/bbl, with August pricing ~10bp and December ~29bp. If

trimmed mean prints 0.9% q/q, we do not think the RBA would raise rates in August and

we remain long 10y ( Stop 5.15%, target 4.3%, entry 4.88%, current 5.08% ) given

leading indicators suggest demand is likely to fall. Risk: oil-driven, global rates sell-off

continues.