The consumer price index, the key measure of inflation in the economy, rose by 0.6 per cent in the three months to June from 0.9 per cent in the March quarter, according to the Australian Bureau of Statistics. Earlier reports based on an AAP survey said economist had predicted a lift of 1 per cent for an annual rate of 3.4 per cent.

The lower-than-tipped increase eased pressure on the central bank to raise interest rates during the election campaign.

"There will be no interest rate hike next week," said Macquarie Interest-Rate Strategist Rory Robertson. "The RBA will remain on hold for at least the next three months and probably into 2011."

"If you were thinking the RBA might make this Federal election campaign interesting, think again," he said.

The inflation data sent mixed political signals. The lower-than-expected figures mean it is less likely the Reserve Bank will lift interest rates before the August 21 election, which will blunt some of the Coalition's campaign against increasing costs. The weaker inflation result, however, also suggest economic recovery may be losing momentum.

At an annual rate, CPI climbed 3.1 per cent in the April-June period, lower than the 3.4 per cent expected, but higher than the 2.9 per cent posted for the three months to March.

While the annual headline is the fastest inflation rate from the end of 2008 until now, the underlying data will cause the central bank less concern.

The average of the Reserve Bank's preferred measures actually plunged in the June quarter to 2.7 per cent from just above 3 per cent for the January-March period. This 2.7 per cent is within the central bank's long-term target rate for inflation of 2 to 3 per cent.