Australia CPI Remains Elevated, Renewing Focus on RBA Rate Hike Bets

Australia's Consumer Price Index (CPI) for July 2026 showed annual headline inflation moderating to 3.5% from 3.8% in June, but remaining above market expectations of 3.3%. This has renewed attention to the country's inflation outlook and the Reserve Bank of Australia's (RBA) monetary policy.

The Australian Bureau of Statistics reported a 1.0% month-over-month increase in CPI for July, exceeding market expectations of 0.9%. The Trimmed Mean CPI, which is used to assess underlying inflationary pressures, increased by 0.5% month-over-month and remained at 3.6% annually.

The RBA's inflation target range is between 2% and 3%, and the elevated underlying inflation suggests that the central bank may need to reassess its monetary policy settings. Market expectations for a possible RBA rate increase in September rose from 17% to 36% following the inflation release, with some economists discussing a potential 25-basis-point hike.