Australian Shares Rise as RBA Warns Inflation Risks Materialising

Australian shares rose on Friday as mining stocks benefited from stronger commodity prices. The S&P/ASX 200 index increased by 0.3% to 8760.6 points, marking its third consecutive day of gains. For the week, it's on track for its best performance in three weeks with a rise of around 0.2%. Michele Bullock, Governor of the Reserve Bank of Australia, warned that inflation risks are materialising due to the Middle East conflict and the AI boom.

The July inflation rate was higher than expected, which has raised concerns about further interest rate hikes by the RBA. UBS expects a 25 basis point increase in both September and November, citing the AI investment boom, surging oil prices, and global central banks' hawkish response to inflation as key drivers.

The mining sub-index rose 1.6% after iron ore and copper prices increased due to Chinese pre-holiday restocking. BHP and Rio Tinto led the gains with around an 0.8% increase each. Gold miners also performed well, with a 3.2% gain marking their best day in a month.