Inflation Eases but Rate Hike Still on Table for RBA

The Australian economy saw inflation ease in July, but the relief may not be enough to prevent further interest rate hikes. The consumer price index (CPI) rose by 3.5% in July, down from 3.8% in June and above the Reserve Bank of Australia's (RBA) target range of 2-3%. Housing remained the largest contributor to inflation, followed by food and non-alcoholic beverages.

The RBA had considered raising the cash rate by 25 basis points to prevent inflation from becoming entrenched. However, the board decided to keep the rate on hold at 4.35% for the second time in a row. Governor Michele Bullock noted that while the decision was intended to give the RBA time to assess the impact of previous hikes, the possibility of another increase remained on the table if inflation stayed above target.

The next meeting of the RBA board is scheduled for September 29, where they will reassess the economic situation and make a decision on interest rates. Despite the recent easing in inflation, experts had predicted that the CPI would come down to as low as 3.3% in July.