Australia’s annual inflation lifted to 3.8 per cent in the year to June, from 3.6 per cent previously, to land broadly in line with expectations before the next interest rate meeting.

The Australian Bureau of Statistics said it was the first annual increase in the consumer price index since December 2022.

On a quarterly basis, inflation rose one per cent in the three months ended June, the same as in the March quarter, and was in line with economists’ expectations.

The all-important data release sets the scene for the Reserve Bank of Australia’s interest rate meeting next week, amid concerns it could be enough to trigger another interest rate hike.

Yet the annual trimmed mean, the central bank’s preferred measure of underlying inflation, undershot expectations to come in at 3.9 per cent, down from four per cent in March.

“This is the sixth quarter in a row of lower annual trimmed mean inflation, down from the peak of 6.8 per cent in the December 2022 quarter,” ABS head of prices statistics Michelle Marquardt said.

State Street Global Advisors APAC economist Krishna Bhimavarapu said a rate cut could come this year.

“The data reiterates our view that the interest rates are restrictive enough in Australia, and the next move by the RBA could very likely be a cut in November 2024,” Bhimavarapu said.

“We think a rate hike at this stage is less likely and could tip the economy into a deeper downturn.”

VanEck head of investments and capital markets Russel Chesler agreed another hike was not needed in the near future.

“It is highly unlikely that the RBA will increase rates next week, but we are not out of the woods. Unless inflation falls, the RBA may still need to hike rates this year, and we are a long way from a rate cut,” Chesler said.

“The RBA has previously stipulated a low tolerance for a slower-than-expected return to target, suggesting it is amenable to measures that stimulate more downward pressure on inflation if needed.”

Deloitte Access Economics partner Stephen Smith said mortgage holders should “breathe a sigh of relief”.

Treasurer Jim Chalmers was asked if he expected the RBA to cut rates before the end of the year following the latest CPI figures.

“I don’t pre-empt decisions made by the Reserve Bank. They will consider these numbers today – but not just these numbers, they will consider the broader conditions in the economy as well,” Chalmers said.

“Headline inflation is precisely what the Reserve Bank forecast, up to the June quarter. Underlying inflation is moderating. They will weigh all that up along with the weakness that we have seen in the economy, the softening around the edges of the labour market.

“I am not in the business of giving free advice to the independent Reserve Bank.

“My job is to manage the budget responsibly along with my colleagues in the cabinet and in the government to deliver those big surpluses – which the Reserve Bank governor has herself said is helping in that fight against inflation – but also to roll out this cost-of-living relief in a way that makes a meaningful difference in household budgets, but also puts downward pressure on prices in a way that the ABS has confirmed today is effective.”

-with AAP