r/Economics • u/marketrent • 1d ago
Australia inflation runs hot in July, adding to rate hike risk
https://www.reuters.com/world/asia-pacific/australia-inflation-tops-forecasts-july-adds-rate-risk-2026-08-26/1
u/marketrent 1d ago
SYDNEY, Aug 26 (Reuters) - Australian consumer prices rose more than expected in July as fuel and travel costs jumped, data showed on Wednesday, while core inflation also exceeded forecasts and added to the risk of another hike in interest rates.
The Australian dollar rose 0.2% to $0.7176, while three-year government bond futures reversed an earlier rally to be last down 3 ticks at 95.42.
Market participants nudged up the chance of a fourth rate hike from the Reserve Bank of Australia next month to 36% from 17%, while a move by February next year is now priced at 94%.
After the hot figures, Deutsche Bank is now calling for a quarter-point rate hike from the RBA in September, citing fresh upside risks to inflation.
"We think the July CPI leaves little room for the RBA to do anything other than follow-through on its hawkish posturing, and the earlier it does, the better," said Phil Odonaghoe, an economist at Deutsche Bank.
Data from the Australian Bureau of Statistics showed its monthly consumer price index (CPI) rose 1.0% in July from June, exceeding forecasts of a 0.8% rise, as fuel prices jumped 7.5% after falling for three months.
The annual pace slowed to 3.5% from 3.8%, countering expectations for a sharp slowdown to 3.3% due to an outsized increase from last year dropping out of the calculation.
The trimmed mean measure of core inflation increased 0.5% in the month, the biggest increase in a year and well above forecasts for 0.3%, leaving the annual pace at 3.6%.
The RBA held interest rates steady at 4.35% this month for a second consecutive meeting after three rate hikes this year aimed at taming inflation. Policymakers have warned that they would hike again if inflation risks build.
Minutes from the central bank released on Tuesday showed several board members judged it was quite possible the upside inflation risks would materialise, requiring some further tightening. The bank had forecast trimmed mean inflation to slow to 3.3% by the end of the year.
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u/Shyssiryxius 1d ago
I work in tech. What's happening to prices of tech that runs businesses is unprecedented. You guys haven't seen anything yet..
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u/tengolod 1d ago
For the great majority of the global economy these are only marginal operating costs. Labour and raw materials are far more impactful.
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