SYDNEY, July 29 (Reuters) - Australian consumer price inflation slowed a tick in the June quarter as fuel costs eased from peaks, while core inflation undershot forecasts and lessened pressure for a further hike in interest rates.
The Australian dollar fell 0.4% to $0.6949, three-year government bond yields declined 10 basis points to 4.479%, and markets pared back the chance of an interest rate increase next month to just 4%, from 21% previously. A hike this year is priced at 40%.
Data from the Australian
Bureau of Statistics out on Wednesday showed its consumer price index (CPI) rose 0.6% in the June quarter, after a 1.4% jump the previous quarter. Annual CPI eased to 4.0%, from 4.1%.
The key trimmed mean measure of core inflation increased by 0.8% in the quarter, just under forecasts of a 0.9% gain. The annual pace picked up to 3.6%, from 3.5%, but came under market forecasts for 3.7% and the Reserve Bank of Australia's own forecast of 3.8%.
For June alone, the monthly CPI fell 0.1%, pulling the annual pace down to 3.8%, the data has already been overshadowed by a 20% surge in oil prices this month as U.S. and Iran resumed attacks in the Gulf.
The Reserve Bank of Australia has raised the key rate three times this year to 4.35% to tame inflation, fully reversing the amount of policy easing implemented last year. Governor Michele Bullock said on Tuesday it was not clear if rate hikes so far were enough to return inflation to target.
The labour market also stayed surprisingly resilient, with the economy churning out more jobs in June despite a small pick-up in the unemployment rate.
(Reporting by Stella Qiu; Editing by Jacqueline Wong and Kevin Buckland)
