Australia’s 10-year government bond yield fell below 4.9%, staying near eight-week lows as softer-than-expected GDP data reinforced bets of fewer rate hikes. The economy grew by just 0.3% in Q1, below expectations of 0.5% and down from 0.9% previously, while annual growth of 2.5% also missed forecasts, reinforcing signs that higher interest rates are cooling demand. The softer readings feed into the Reserve Bank’s June 15–16 policy meeting, where officials will assess whether current settings are sufficiently restrictive to bring inflation back to target after three rate hikes this year. This comes against a backdrop of geopolitical tensions in the Middle East, which have pushed up global energy costs and added to external inflation risks. RBA board member Ian Harper noted that market measures of future inflation were creeping higher, describing it as a worrying development for expectations. Still, markets have ruled out another rate hike this month, but see a 50-50 chance in August.

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