The increase inflation has gone against expectations and sunk back to 5.6 per cent in May from 6.8 per cent in April.
Markets were expecting the monthly consumer price index to moderate to 6.1 per cent over the month after a larger-than-anticipated uptick in April.
“This month’s annual increase of 5.6 per cent is the smallest increase since April last year,” Australian Bureau of Statistics head of prices statistics Michelle Marquardt said.
“While prices have kept rising for most goods and services, many increases were smaller than we have seen in recent months.”
Housing, food and beverages and furnishings and household equipment recorded the largest price rises, with a fall in automotive fuel offsetting these increases.
But Ms Marquardt said the decline in inflation was more modest when volatile items were stripped out.
Underlying inflation fell to 6.4 per cent in May, slightly lower than the rise of 6.5 per cent recorded in April.
The official inflation update will be on the Reserve Bank board’s watch list ahead of the July cash rate meeting next week.
Stubbornly high inflation has put pressure on the central bank to keep lifting interest rates to a level that has economists worried about very sickly growth or a possible recession.
The central bank has handed out four percentage points of rate increases since April last year in an attempt to pull inflation back within its two-three per cent target range.
