Australian Household Spending Boosts Rate Hike Bets Amid Inflation Concerns

Australia's household spending continued its strong run in July, rising for the third consecutive month. The data showed that consumers splurged on recreation, food, and health, indicating that demand remains resilient despite higher borrowing costs.

The Reserve Bank of Australia (RBA) is now faced with a 47% probability of raising interest rates next month, according to market participants. This comes after the RBA warned of even higher rates if inflation risks materialize.

The solid reading added to the hot inflation report from yesterday, which had already sparked bets on a rate hike. Despite this, there are no signs of a sharp slowdown in consumption, and three major banks have abandoned their previous call for keeping interest rates steady at 4.35%.