Australian bonds rally as soft inflation data kills rate hike hopes

Lower-than-expected core inflation figures have effectively removed the prospect of an August rate increase from the Reserve Bank of Australia, sending local bond yields lower and weighing on the Australian dollar.

By Handelsavisen Newsroom · Automated 2026-07-29 06:39 UTC · 1 min read

Australian government bonds surged on Wednesday after official data revealed that core inflation for the June quarter came in below market forecasts.

The softer-than-expected price pressures have significantly reduced the likelihood of further monetary tightening by the Reserve Bank of Australia (RBA) in the near term.

4% to trade at $0.6946 against the US dollar, extending a decline that began in the previous session.

The release prompted a sharp repricing in local fixed-income markets, with bond yields falling as investors scaled back expectations for an interest rate hike.

The currency market reacted swiftly, with the Australian dollar weakening 0.4% to trade at $0.6946 against the US dollar, extending a decline that began in the previous session.

This development marks a decisive shift in the policy outlook for Australia.

Bond investors had already been dialing down the probability of an August rate increase, but the latest inflation print has effectively eliminated that scenario from the consensus view.