Australia’s consumer price index (CPI) inflation rose more than expected in July, reaching a one-year high and raising doubts about further interest rate cuts from the Reserve Bank of Australia (RBA).
Data from the Australian Bureau of Statistics showed CPI grew 2.8% year-on-year, above forecasts of 2.3% and accelerating sharply from 1.9% in June. This marked the highest inflation reading since July 2024.
Underlying inflation also climbed, with the annual trimmed mean rising to 2.7% from 2.1% in June—its highest in three months and nearing the upper end of the RBA’s 2% to 3% target range. Meanwhile, CPI excluding volatile items and holiday travel surged to 3.2% in July from 2.5% previously.
The rise in inflation was driven by higher spending on housing, food, and alcohol, alongside increased holiday-related demand. Electricity costs also added pressure, with some households missing out on government rebates for power bills.
The data came just one day after the RBA’s August minutes signaled that more rate cuts could be possible if inflation eased as expected. The central bank had already lowered rates by 25 basis points in August, citing slowing inflation and global trade headwinds. But July’s stronger CPI reading complicates the outlook, suggesting inflation may not be cooling in line with forecasts.
The Australian dollar (AUD/USD) gained 0.2% following the data, while the ASX 200 pared early gains.
Analysts at Capital Economics said the rise in underlying inflation increases the risk of fewer RBA cuts ahead. Their base case remains three more cuts, but they warned the risks are shifting toward less easing. IG analysts also noted markets are now repricing expectations for rate cuts after the latest figures.
