Inflation Expectations Drop to Lowest in 2011: Australia Credit

Investor expectations of Australian inflation dropped to the least this year on prospects faltering growth will cool consumer-price gains, giving the central bank scope to extend its longest interest-rate pause since 2007.

The so-called breakeven rate on 10-year inflation-linked notes fell nine basis points, or 0.09 percentage point, this month and touched 274 basis points, the least since November. The rate reached a four-year high at 306 on May 11. The one-year inflation swap rate touched 2.67 percent on July 20, the lowest in almost 15 months, and slid 61 basis points in the three months to June 30, the biggest quarterly drop since 2008.