AUD Firms as July CPI Accelerates to 3.5%, Boosting RBA Hike Bets

The Australian Dollar (AUD) remained strong against major peers on Wednesday after the country's Consumer Price Index (CPI) rose 3.5% year-on-year in July, exceeding market expectations of 3.4%. This accelerated pace of inflation has reinforced expectations that the Reserve Bank of Australia (RBA) may need to raise interest rates again before the end of the year.

The data shows that the monthly CPI indicator has now exceeded 3% for the ninth consecutive month as of July, according to the Australian Bureau of Statistics. This persistent price pressure, particularly in housing and services, has kept the central bank on a hawkish footing.

Economists are divided on the RBA's next move, with some arguing that the resilience of the labor market and consumer spending justify another hike, while others point to slowing GDP growth and weak retail sales as reasons to hold steady. The CPI surprise has tilted the balance toward tightening, at least in the short term.