Australia's Inflation Rate Surges, Fueling Rate Hike Bets

Australia's inflation rate rose more than expected in July, sparking concerns of another interest rate hike from the Reserve Bank of Australia (RBA).

The Australian Bureau of Statistics (ABS) reported a monthly consumer price index (CPI) rise of 1.0% in July, exceeding forecasts of a 0.8% increase.

Fuel prices jumped 7.5%, contributing to the higher-than-expected inflation rate, while core inflation rose 0.5% in the month, its biggest increase in a year.

The RBA has warned that it would hike interest rates again if inflation risks build, and market participants have increased their chances of a fourth rate hike from 17% to 36%.

Deutsche Bank is now calling for a quarter-point rate hike from the RBA in September, citing fresh upside risks to inflation. 'We think the July CPI leaves little room for the RBA to do anything other than follow-through on its hawkish posturing,' said Phil Odonaghoe, an economist at Deutsche Bank.

Other economists have also expressed concerns about Australia's inflation rate. Harry Murphy Cruise, head of economic research for Oxford Economics Australia, warned that there is a real risk that inflation remains too high and fails to fall in line with the RBA's forecasts.