Australia’s inflation rate accelerated in August, although the increase came in slightly below market expectations.
The latest figures arrived just one day after the Reserve Bank of Australia raised interest rates to their highest level in 15 years.
Australia CPI Rises to 4%
The consumer price index increased 4.0% year-on-year in August, according to data from the Australian Bureau of Statistics.
That marked an acceleration from 3.5% in July, but the result was slightly below economists’ expectations for a 4.1% increase.
On a monthly basis, CPI rose 0.4% in original terms and 0.7% on a seasonally adjusted basis.
Underlying Inflation Remains Elevated
The trimmed mean inflation measure, which removes large price swings and is closely monitored by the RBA, remained unchanged at 3.6% year-on-year.
On a monthly basis, trimmed mean inflation increased by 0.2%.
Capital Economics noted that underlying inflation did not show any additional acceleration.
However, the trimmed mean still increased by 1.0% over the past three months, above the RBA’s quarterly forecast of 0.8% for both the third and fourth quarters.
Fuel Prices Drive Inflation Higher
Higher fuel costs were one of the biggest contributors to the August inflation increase.
Automotive fuel prices surged 14.8% from July, according to the ABS.
The rise was linked to higher global oil prices and the removal of remaining federal fuel-excise relief.
Overall transport inflation climbed 5.6% year-on-year.
Housing Costs Continue to Rise
Housing also remained a major source of inflation pressure.
Housing inflation accelerated to 5.7% in August, up from 5.0% in July.
New dwelling prices increased 5.4%, while electricity costs surged 13.2% following the end of government rebates.
Rental prices also rose 3.6%.
RBA Raises Interest Rates to 4.60%
The inflation data came one day after the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60%.
It was the RBA’s fourth rate increase of the year.
The central bank said some of the inflation risks it had previously identified were beginning to materialize.
Officials highlighted higher energy costs, domestic capacity pressures and rising prices for technology-related goods.
The RBA also kept the possibility of additional interest rate increases open if inflation remains too strong.
November RBA Meeting in Focus
The RBA’s next monetary policy meeting is scheduled for November 2-3.
The latest inflation figures will likely form part of the central bank’s assessment of whether further tightening is necessary.
However, RBA Governor Michele Bullock indicated that the August CPI report alone would not determine the central bank’s next move because the data reflect past price developments.
RBA May Remain in Wait-and-See Mode
Capital Economics expects the RBA to maintain a cautious approach in the near term.
The firm believes policymakers will look for clearer evidence that inflation is moving sustainably lower before making another decision on interest rates.
It also said the latest inflation figures support its view that the cash rate may have already reached its peak.
The Australian dollar weakened by roughly 0.3% against the US dollar, while the S&P/ASX 200 traded around 0.6% higher.
Overall, the latest data show that inflation pressures remain elevated in Australia, even though the August CPI reading came in slightly below expectations.
