Banks, commodity stocks weigh on Aussie shares; inflation data awaited

* Benchmark falls for fourth straight day

* Lowest close since March 29

* Metcash up 4.7%, second-biggest gainer on AXJO

* Inflation data due on Wednesday

June 26 (Reuters) - Australian shares closed at their lowest level in nearly three months on Monday, dragged by banking and commodity stocks, while investors awaited local inflation data due later in the week for cues on future monetary policy.

The S&P/ASX 200 index extended losses to a fourth straight session, falling 0.3% to finish at 7,078.70, its lowest level since March 29. The benchmark lost 2.1% last week.

Analysts at top banks in Australia expect inflation in May to have declined from the prior month. However, that does not affect their predictions of two more interest rate hikes by the Reserve Bank of Australia (RBA) in July and August.

"While the monthly CPI indicator will be key to the decision of whether the RBA will follow up with another rate hike in July, other data out in the month are also suggestive of upside inflation risks," Taylor Nugent, an economist at National Australia Bank (NAB) said.

NAB continues to expect quarter-point rate hikes in both July and August, taking the cash rate to 4.6% from current 4.1%.

Brad Smoling, managing director at Smoling Stockbroking, expects the decline in inflation to take the pressure off the central bank, encouraging it to "sit back and pause and wait for further confirmation at that data".

Investors will also focus on domestic jobs and retail sales data this week.

In Sydney, heavyweight financials sub-index dropped 0.5%, with three of the so-called 'Big Four' banks declining between 0.2% and 0.8%.

Miners ended 0.3% lower, pressured by mounting supply and weak downstream demand in top consumer China. BHP Group and Rio Tinto both fell 0.3% each.

Meanwhile, gold stocks climbed 1.8% as bullion prices rose on a weaker dollar. Top gold miner Newcrest Mining advanced 1.2%.

Among individual stocks, grocery wholesaler and distributor Metcash surged 4.7%, in their biggest intraday jump since December 2020, after reporting strong annual earnings.

In New Zealand, the benchmark S&P/NZX 50 index settled 0.8% lower to close at 11,638.68. (Reporting by Ayushman Ojha; Editing by Nivedita Bhattacharjee and Eileen Soreng)