Data from the Australian Bureau of Statistics showed that inflation in Australia rose by 3.5% YoY in Julyslower than the 3.8% increase in June and the lowest since March but higher than the 3.4% rise markets had expected.
One reason for the decline may be that the expanded Commonwealth Energy Bill Relief Fund and government rebates came into effect in July, effectively lowering household electricity costs.
However, with the exception of volatile items such as fuel, fruits and vegetables and holiday travel, CPI continues to slow from 4.0% to 3.7% A year ago in July.
Reserve Bank of Australia cuts average inflation Core inflation – an alternative measure of underlying inflation – came in at 3.8%, down from a 4.1% annual increase in June and the lowest since early 2022.
Link to the Australian Bureau of Statistics Consumer Price Index report for July
The report also noted that housing (+4.0%), food and non-alcoholic beverages (+3.8%), alcohol and tobacco (+7.2%), and transportation (+3.4%) saw the biggest gains during the month.
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Comparison between the Australian Dollar and major currencies Chart by TradingView
While July inflation figures hit multi-month lows, the declines were small enough to support recent comments from RBA Governor Bullock that core inflation remains “too high” and has been falling too slowly to justify a rate cut.
Traders continue to price in a December rate cut from the Reserve Bank of Australia, but today’s high inflation figures suggest that RBA Governor Bullock and her team may not need to pursue a hawkish monetary easing path.
The Australian dollar, which fell slightly in early Asian trading, rose broadly on the back of the release of higher inflation data.
So far, the Australian dollar is trading slightly lower against its major counterparts and is trading in ranges close to its intraday highs.
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