Inflation data from Australia showed it continues to slow down. Next week, the Reserve Bank of Australia (RBA) will have its monetary policy meeting. Analysts at Commerzbank point out that inflation data suggest the central bank will not raise rates. 

Key quotes:

“The Reserve Bank of Australia (RBA) can't really breathe a sigh of relief yet, but it can breathe a little. Inflation fell quite significantly in the first quarter, from 7.8% to 7.0%. The two measures of core inflation also fell noticeably to 6.6% and 5.8%. This is likely to confirm the RBA's expectation that inflation will gradually decline and that the interest rate pause earlier this month was justified.”

“The data suggest that the RBA will not raise the key rate next week either, but leave it at 3.60%. However, with (core) inflation still well above the 2-3% inflation target, it is likely to maintain the restrictive undertone in its statement and assure that it is ready to do more should it be necessary.”

“The market already expects that the interest rate cycle in Australia is over and that no more rate hikes will follow, but that the first rate cuts are on the agenda in the fall.”