Data from the Australian Bureau of Statistics (ABS) showed that inflation in Australia rose by 3.5% y/y in July, slower than June’s 3.8% increase AND the lowest since March but higher than the 3.4% uptick that the markets had expected.
One reason for the decline may be that the expanded Commonwealth Energy Bill Relief Fund rebate and the introduction of State government rebates took effect in July, effectively lowering household electricity costs.
However, excluding volatile items like fuel, fruit and vegetables, and holiday travel, CPI still slowed down from 4.0% to 3.7% from a year ago in July.
Reserve Bank of Australia’s (RBA) trimmed mean inflation – an alternative measure of underlying inflation – came in at 3.8%, lower than the 4.1% annual increase in June and marked the lowest since early 2022.
The report also detailed that Housing (+4.0%), Food and non-alcoholic beverages (+3.8%), Alcohol and tobacco (+7.2%), and Transport (+3.4%) saw the biggest gains for the month.
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Overlay of AUD vs. Major Currencies Chart by TradingView
While July’s inflation numbers hit multi-month lows, the declines were small enough to support RBA Gov. Bullock’s recent remarks that underlying inflation remains “too high” and was falling too slowly to justify a rate cut.
Traders continue to price in an RBA rate cut in December, but today’s sticky high inflation figures suggest that Gov. Bullock and her team may not need to take an aggressively dovish monetary easing path.
The Australian dollar, which fell slightly at the start of the Asian session, jumped across the board on the sticky high inflation release.
So far, the Aussie is seeing minimal pullback against its major counterparts and is trading in ranges close to its intraday highs.
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