Australia Inflation Surges Past Forecasts, Rate Hike Risk Soars

Australia's inflation rate topped forecasts in July, rising by 1.0% from June as fuel costs jumped 7.5%. This exceeded expectations of an 0.8% increase and added to the risk of another interest rate hike. The Reserve Bank of Australia had forecast trimmed mean inflation to slow to 3.3% by year-end.

The Australian Bureau of Statistics reported its monthly consumer price index (CPI) rose, with core inflation increasing 0.5% in July, the biggest increase in a year and above forecasts for 0.3%. The annual pace slowed to 3.5% from 3.8%, countering expectations for a sharp slowdown.

ANZ bank is now tipping a quarter-point rate hike in November after previously forecasting no change to interest rates, while National Australia Bank said its RBA call was under review. Deutsche Bank called for a hike in September, citing fresh upside risks to inflation, although economists at UBS still think the RBA is more likely to hike in November.