Investors reacted by lengthening the odds on the Reserve Bank of Australia (RBA) resuming raising rates at its May 2 meeting, having paused in April after a 10-hike streak.

Futures now imply only a 9% chance of a quarter-point rise in the 3.6% cash rate, while the local dollar shed early gains to stand at $0.6620 .

The market had already moved that way overnight after a regional U.S. bank reported a huge outflow of deposits, suggesting global financial strains were not yet over.

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 1.4% in the March quarter, just above market forecasts of 1.3% but the smallest increase since late 2021.

The annual pace slowed to 7.0%, from 7.8%, suggesting inflation had finally peaked after two years of rapid acceleration in costs. For March alone, the CPI rose 6.3% on the year, down from 6.8% in February.

Crucially a closely watched measure of core inflation, the trimmed mean, rose 1.2% in the March quarter, nudging the annual pace down to 6.6% and under forecasts of 6.7%.

Still, core inflation remains far above the RBA’s target band of 2-3% and policy makers have been worried it could fuel a price wage spiral absent further tightening.

Details of the inflation report showed hefty increases for health services, education, gas and domestic holiday travel and accommodation. Costs fell for clothing and household goods, a sign the global pulse in goods prices was clearly easing.

As a result, the CPI for tradable prices that are mainly set by world trends rose just 0.3% in the March quarter, while prices for non-tradables that are mainly domestic services climbed a steep 1.9%.

That divergence could make for a very close call on rates when the RBA meets next week.

“Headline inflation has peaked, and weaker tradables inflation will contribute to slower inflation over the rest of 2023,” said Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics.

“But we think there is enough momentum in core and services inflation to warrant tighter policy settings, and maintain our expectation for another rate hike in May.”