Australia CPI inflation grows more than expected in July; dents RBA rate cut bets

Investing.com-- Australian consumer price index inflation grew more than expected to a one-year high in July, while an outsized increase in underlying inflation dampened bets on more interest rate cuts from the Reserve Bank of Australia.

CPI grew 2.8% year-on-year, data from the Australian Bureau of Statistics showed on Wednesday. The print was higher than expectations of 2.3% and surged from the 1.9% in June.

Headline CPI was also at its highest level since July 2024.

Underlying inflation, as represented by annual trimmed mean inflation, rose to 2.7% in July from 2.1% in June, hitting a three-month high.

CPI excluding volatile items and holiday travel rose to 3.2% in July from 2.5% in June.

The higher CPI reading came amid steady increases in housing, food, and alcohol spending. The July school holiday also spurred a bump in spending.

Electricity costs also contributed to the higher CPI print, especially as some households did not receive government rebates on their power bills.

Wednesday’s data comes just a day after the minutes of the RBA’s August meeting reiterated the bank’s openness to cutting interest rates further, especially if inflation cools further in line with its forecasts.

The RBA had cut rates by 25 basis points in August, citing progress in cooling inflation and signs of economic strain due to global trade ructions.

But Wednesday’s data now complicates the path forward for the RBA, given that inflation may not be cooling in line with the central bank’s expectations. The RBA had unexpectedly kept rates steady in July on this notion.

The Australian dollar’s AUD/USD pair rose 0.2% after the CPI data, while the ASX 200 stock index trimmed early gains to trade flat.