Data from the Australian Bureau of Statistics on Wednesday showed the headline consumer price index rose 0.4% quarter-on-quarter in the June quarter, just under forecasts of a 0.5% increase, and unchanged from the last quarter.

Annual CPI inflation crawled at 2.1% versus expectations centred on a 2.2% gain. Key measures of underlying inflation favoured by the Reserve Bank of Australia averaged around 1.9% for the year, in line with market forecasts.

Core inflation has now undershot the RBA's long-term target band of 2% to 3% for ten straight quarters, the longest such run on record.

A major headwind has been underwhelming wages growth, which is running near historic lows even as employment has boomed. As a result, the central bank has kept interest rates at an all-time low of 1.5% since mid-2016 and sees "no strong case" for shifting its stance anytime soon. Interest rate futures do not fully price in a hike to 1.75% until end of 2019.

The Australian Bureau of Statistics reported a small acceleration in inflation in tradable prices - goods that are most affected by international competition - which rose 0.5% in the quarter thanks to higher petrol prices.

In contrast, prices of non-tradables, or domestic-driven inflation, which mainly cover services crawled at 0.3%. In particular, there was barely any inflation for those goods and services whose prices are not determined by the government.

The main price decreases in the June quarter were for holiday travel and accommodation and vegetables while healthcare and petrol contributed positively to the index.

The AUD faltered on Wednesday after data showed inflation remained stubbornly low last quarter despite relatively brisk economic growth, cementing the case against a rise in interest rates for months to come. is an independent macroeconomic consultancy with thousands of subscribers all over the world. We provide fundamental research to help our clients make better investing decisions. Our subscribers should expect to get access to:

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