Australia’s May CPI Slows to 2.1% YoY, Below Market Expectations

Australia’s May CPI Slows to 2.1% YoY, Below Market Expectations

Australia's Consumer Price Index (CPI) inflation cooled in May 2025, rising 2.1% year-on-year, compared to 2.4% in April, according to the Australian Bureau of Statistics (ABS). The figure came in below market expectations of a 2.3% increase, signaling continued disinflation in the Australian economy.

CPI Slows More Than Forecasted

The deceleration marks a slower pace of price growth, giving investors and policymakers more reason to believe that inflationary pressures may be easing across sectors.

The lower-than-expected CPI print could strengthen expectations of a more dovish stance from the Reserve Bank of Australia (RBA) in upcoming meetings. With inflation tracking closer to the RBA’s target range of 2–3%, monetary policy tightening may be paused—or even reversed—if the trend continues.

Market Reaction and AUD Outlook

While Australian Dollar (AUD) movements remained muted in early trading, a sustained decline in inflation may weigh on the currency if rate cut expectations build further.

Investors are now closely watching upcoming RBA commentary and labor market data to gauge the likely trajectory of interest rates heading into the second half of 2025.

Related Reading on Tredu.com:

• Will the RBA Cut Rates in 2025? Inflation Trends Signal Possible Easing
• How Inflation Impacts the Australian Dollar
• Australia's Economic Outlook: What to Expect in Q3 2025