Inflation has finally returned to the Reserve Bank of Australia’s target band for the first time since the COVID-19 pandemic, but fund managers warn that lingering price pressures should curb hopes for deeper easing.

Bond traders fully expect the central bank to cut the cash rate by a quarter-point rate to 3.85 per cent when it meets on May 20 after data showed core inflation – the RBA’s preferred measure – cooled to 2.9 per cent in the March quarter from 3.3 per cent, within the 2 per cent to 3 per cent target. Inflation peaked at nearly 7 per cent in 2022.