Australian Inflation Spikes But Rate Hike Bets Slump

Australia's inflation rate picked up in August, but markets have tempered expectations for another Reserve Bank of Australia (RBA) interest rate hike.

The country's consumer price index rose 0.4% in August, with inflation accelerating to 4.0% year-over-year, driven by higher fuel prices and the fading impact of earlier tax relief.

However, 'trimmed mean' inflation, which strips out one-off moves to show the underlying trend, increased only 0.2% on the month, remaining at 3.6% year-over-year for a third consecutive month.

The mixed signals have led traders to reassess their expectations, with interest-rate swaps reducing the implied probability of a November hike from 35% to 20%, and three-year government bond futures rising as a result.