Asia-Pacific markets traded mixed Wednesday after the U.S.-China talks in Sweden ended without a tariff truce extension Tuesday stateside. A postponement of higher duties won’t be final until President Donald Trump signs off on the plan, U.S. negotiators said.

U.S. Commerce Secretary Howard Lutnick also affirmed that President Donald Trump’s upcoming Friday deadline to impose major tariffs on a slew of trading partners will not be delayed further.

However, Lutnick noted that trade negotiations with China are progressing on a separate timeline, he said on CNBC’s “Squawk Box.”

The RBA has today hiked the cash rate target by 25 basis points, taking it from 2.35% to 2.6%. It is now the sixth month in a row that the central bank has increased the cash rate in an effort to curb surging inflation.

In a statement published at the conclusion of the central bank’s meeting, RBA governor Philip Lowe said that the nation’s inflation–as is the case in most countries–is “too high”.

“Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role,” Lowe says.

Yet, Lowe remains adamant that the board’s priority is to return inflation to a 2-3% range, while “keeping the economy on an even keel”.

“The path to achieving this balance is a narrow one and it is clouded in uncertainty,” Lowe says, acknowledging that one source of uncertainty is the deteriorating outlook for the global economy

“Another [source] is how household spending in Australia responds to the tighter financial conditions. Higher inflation and higher interest rates are putting pressure on household budgets, with the full effects of higher interest rates yet to be felt in mortgage payments.”

In terms of mortgage payments, this latest hike means people with an average $500,000, 25-year mortgage will pay an extra $76.45 a month. It will equate to more than $150 a month for those with a $1 million mortgage.

Since the RBA started lifting rates in May, that same mortgage borrower would have seen their monthly repayments jump by more than $500.

To date, the aggressive monetary tightening from the RBA has seen the highest number of Australian mortgage holders classified as ‘At Risk’ since May 2019—that being 942,000 Australians, Roy Morgan research has found.

And if the rate is hiked again in November–which it is predicted to be–that number would rise by 158,000 to 1.1 million (24.3%) – the highest since July 2013.

Looking back, the last time rates rose this quickly was in 1994 following the recession of the early ’90s.

At the time, the government and RBA officials had announced what was then considered a bold inflation target of between 2-3%. So when inflation threatened to rise again following the recession, the RBA did exactly as it is doing now: raised the cash rate over many months until it reached 7.5%.

It wasn’t until August 1996 before the cash rate began to decline down, with many Australians now concerned that our current climate is a matter of history repeating itself.

After all, when addressing a parliamentary standing committee last month, Lowe made it clear that further hikes to the cash rate would be required: albeit also noting that it would be necessary to slow both the speed and size of rate hikes.

While the RBA is not on a “pre-set path”, as Lowe explained, it was committed to doing whatever was necessary to bring Australia’s inflation rate back down to its goal of between 2-3%.

But this commitment to lowering the inflation rate has many Australians and economists concerned, voicing fears that these consecutive cash rate increases will see the economy thrown into a recession we “don’t need to have”.

Nevertheless, Lowe has not shied away from signalling further cash rate hikes are to come, stating that the RBA is closely monitoring the global economy, household spending and wage and price-setting behaviour.

It also anticipates a further increase in inflation over the months ahead, before it declines back to the central goal. In the statement, the bank’s central forecast for CPI inflation was reported to be around 7.75% over 2022, a little above 4% over 2023 and around 3% in 2024.

Inflation eased further last month, with consumer prices rising 2.1 per cent over the year to May, down from 2.4 per cent the previous month.

According to the Australian Bureau of Statistics, the monthly Consumer Price Index (CPI) was at its lowest level since October 2024.

The annual trimmed mean, a measure of underlying inflation, was down to 2.4 per cent in May, from 2.8 per cent in April, which the ABS said was its lowest rate since November 2021.

Ahead of the data release, market pricing put the chance of an interest rate cut in July around 81 per cent, according to LSEG.

Following the weaker-than-expected figures, pricing rose to an 88 per cent chance.

The Reserve Bank next meets to consider interest rates in just under a fortnight’s time.

“Underlying inflation sits comfortably within the RBA’s target, allowing the RBA to cut rates again with confidence that inflation is under control,” economist Callam Pickering, from job site Indeed, said.

He noted that “even a less favourable set” of inflation figures might have been overlooked by the RBA and not been a barrier to a rate cut, given the concerns about the global economic outlook.

“The RBA will need to cut rates at least another couple of times this year to provide sufficient support to households and businesses, while ensuring that the unemployment rate remains low and we avoid recession,” he said.

Mr Pickering has forecast a 0.25 percentage point cut on July 8, followed by another move lower in either August or September.

Commonwealth Bank economists were among those shifting their rate cut forecasts forward in the wake of the CPI data.

“We now expect the RBA to cut the cash rate in July and August this year (from August and September),” CBA economist Harry Ottley wrote, describing inflation as remaining “benign” in the second quarter.

“There is a clear risk of a further cut late this year or early next.”

Deutsche Bank chief economist Phil O’Donaghoe also changed his call to July, along with further cuts in August and November.

“Our terminal rate this easing cycle remains at 3.1 per cent, so we now see the RBA arriving there in November, rather than February,” he noted.

Grocery price rises ease off

While food and non-alcoholic beverages were the biggest contributor to the headline CPI, they rose 2.9 per cent over the year — down from 3.1 per cent in April.

Fruit and vegetables rose 2.8 per cent in the year to May, down significantly from the 6.1 per cent increase recorded a month earlier.

Looking at fruit in isolation, prices actually fell last month, down 2.7 per cent, with lower prices for mandarins, oranges, avocados and apples.

Fruit prices fell in May, including for mandarins and oranges. (ABC: Jessica Hayes)

Meanwhile, electricity rebates continued to impact energy costs, with electricity prices down 5.9 per cent over the 12 months to May — that was a smaller fall than the 6.5 per cent in April.

“In Victoria, the impact of these rebates was lower in May than April due to the timing of payments,” ABS head of prices statistics Michelle Marquardt noted.

Who ranks last in helping customers struggling to pay energy bills? Photo shows Energy tower with blue skies and fencing The energy sector is lagging behind banking and water when it comes to supporting customers in hardship.

” Without the Commonwealth and state government rebates, electricity prices would have risen 2 per cent in the 12 months to May. ”

Beatshares chief economist David Bassanese noted that the monthly CPI readings could be more volatile than the quarterly data.

The next quarterly CPI is due in late July, after the next RBA board meeting.

“The low trimmed mean result keeps the door open for a potential RBA rate cut in July, but my base case is the [Reserve] Bank will still wait until August — following confirmation of low underlying inflation in the more comprehensive and reliable quarterly CPI report in late July,” he wrote.

” All up, however, the underlying trend for inflation still appears downward which is good news for the many millions of Australian still counting on further mortgage rate relief in coming months. ”

Mortgage arrears rise from record lows Photo shows A red sold sticker across a for sale sign outside a house with a large front yard on a sunny day More borrowers are falling behind on mortgage repayments, but experts say numbers are overall low and expected to fall further, with rate cuts expected.

However, Mr Bassanese warned that any easing in affordability for first home buyers would likely be short-lived because he expected lower mortgage rates to filter through to higher house prices.

Annual housing inflation eased back to 2 per cent in May, down from 2.2 per cent in April.

Rents rose 4.5 per cent over the year, down from 5 per cent a month earlier.

“This is the lowest annual growth in rental prices since December 2022, consistent with smaller increases in advertised rents and stable vacancy rates across most capital cities,” the ABS noted.

New dwelling price rises also cooled to the smallest annual growth since April 2021, which the ABS attributed to “project home builders offer[ing] discounts and promotional offers to entice business.”