Australian Inflation Surges, Fueling Rate Hike Fears
Australia's inflation rate ran hot in July, exceeding expectations and sparking fresh concerns about another interest rate hike from the Reserve Bank of Australia.
The Australian Bureau of Statistics reported that consumer prices rose 1.0% in July from June, outpacing forecasts of a 0.8% increase as fuel costs jumped 7.5%. The annual pace slowed to 3.5% from 3.8%, but core inflation exceeded expectations with a 0.5% monthly rise.
The strong inflation data sent the local dollar up 0.3% to $0.7183, its highest level in 12 weeks. Traders are now pricing in a 38% chance of a rate hike in September, up from just 17% before, and fully expect another increase by February next year.
ANZ, one of Australia's big four banks, has revised its forecast to predict a quarter-point rate hike in November. National Australia Bank is reviewing its RBA call after the data, which showed strong upside risk to the central bank's inflation forecast.