Australian shares closed at an over five-month high on Wednesday after inflation slowed more than expected in the second quarter, indicating lower chances of another interest rate hike at the central bank’s next meeting.

The S&P/ASX 200 index closed 0.9% higher at 7,402 points - its highest level since Feb. 16 - with gains led by mining and banking stocks.

Data from the Australian Bureau of Statistics showed the consumer price index (CPI) rose 0.8% in the second quarter from the first, the smallest increase since the third quarter of 2021 and below market forecasts of 1.0%.

Markets have now priced in a 31% chance of a quarter-point hike at the Reserve Bank of Australia’s next meeting on Aug. 1.

This compares with a 50% chance before the data was published.

“The (Reserve) Bank may well conclude that it has tightened policy enough to return inflation to target,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

“However, with the labour market still very tight and services inflation still accelerating, we think it has more work to do.”

Services inflation, which policymakers have feared would be sticky, accelerated to a fresh 22-year high of 6.3%.

Traders now look ahead to the Federal Reserve’s interest rate decision later in the day, where a 25 basis point hike is widely anticipated.

In Sydney, the mining sub-index ended the session up 1.9% at a five-week high.

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BHP Group and Fortescue Metals Group rose 2.3% each.

Rio Tinto closed up 1.4% ahead of its half-yearly results.

Rio reported a near 34% drop in first-half underlying earnings and slashed its interim dividend. Financials closed up 1.1%, with Australia’s so-called “Big Four” banks adding between 0.8% and 1.7%.

Energy stocks were up 0.6%. Beach Energy’s shares advanced 6.9% to their highest in seven months after posting a rebound in revenue for the June quarter.

New Zealand’s benchmark S&P/NZX 50 index settled up 0.2% at 11,954.73.