SYDNEY, July 25 (Xinhua) -- Despite a modest increase, Australia's rate of inflation has fallen short of expectations on Wednesday.

With markets anticipating a 0.5 percent rise over the second quarter of 2018 and year-on-year spike of 2.2 percent, the Australian Bureau of Statistics' (ABS) figures came in at 0.4 percent over the three months to June, leaving the annual rate of growth at 2.1 percent.

"Most of this annual growth is due to strength in fuel, electricity and tobacco," chief economist at the ABS Bruce Hockman said.

"(But) annual growth in prices of discretionary goods such as clothing and footwear, and furniture and household equipment remain subdued."

The most significant reductions in price came with a 1.3 percent fall in communication, recreation and culture, and 0.4 percent dip in the cost of food and non-alcoholic beverages.

Although the 2.1 percent lift has still managed to land in line with the Reserve Bank of Australia's 2-3 percent target for this year, it remains extremely unlikely the central bank will look to increase the historically low interest rate which has sat 1.5 percent since August 2016.

As a result of the lackluster data, the Australian dollar fell from 74.50 U.S. cents at 11:30 a.m. (AEST) to 74.16 U.S. cents immediately after the release.