The Australian Bureau of Statistics released new data today, indicating that the monthly consumer price index dropped to 2.1 percent in May, down from 2.4 percent in April, nearing the lower end of the Reserve Bank of Australia’s target range.

It is also well below the market expectations, which had pencilled in 2.3 per cent as the most likely figure.

Offering further hope for those anticipating a rate cut, the trimmed mean, also referred to as underlying or core inflation, decreased from 2.8 percent to 2.4 percent, marking its lowest level since November 2021.

Although the monthly figures are generally given less weight than the quarterly figures, the Reserve Bank’s next interest rate decision will be handed down on July 8, before the next instalment of quarterly data is released.

With only two lots of monthly inflation data to go on, economists believe the RBA will move to cut the cash rate for the third time this year at its next meeting.

“Australia’s inflation continues to fall faster than expected, and today’s softer-than-forecast reading of 2.1 per cent could be the final piece of the puzzle for the RBA to cut next month,” eToro market analyst Josh Gilbert said.

“With jobs weakening and prices cooling, the board may find it harder to justify staying on the sidelines… today’s data suggests the RBA no longer needs to wait,” he added.

Before this morning’s inflation data, investors had priced in an 89 per cent chance of a rate cut from 3.85 to 3.60 per cent next month.

“Markets were already leaning in favour of a rate cut next month, and this data will only solidify those expectations,” Gilbert said.

“This is exactly the kind of inflation print the RBA has been waiting for.

“Today’s reading also showed falling electricity prices and slower rental growth, which are key signs that cost-of-living pressures are starting to ease and are a significant factor for the central bank’s decisions.”