Inflation Figures Spark Pressure on RBA to Hike Interest Rates

Today's Australian inflation data release showed that headline CPI has eased from 3.8 to 3.5 percent, but remains higher than expected at 2-3 percent target of the Reserve Bank of Australia (RBA). The underlying trimmed mean figure is also higher than forecast, staying steady at 3.6 percent.

According to Chris Kohler, 9News finance editor, 'The trimmed mean inflation number… is probably going to be a little bit uncomfortable for the Reserve Bank.' He noted that it's above what they were expecting and the market.

Wee Khoon Chong, BNY's senior Asia-Pacific market strategist, said while the figures aren't good, they're unlikely to force the RBA to hand down a fourth rate hike of the year on September 29. However, he mentioned that the CPI print alone is unlikely to trigger a policy response at the September meeting.

The inflation increase was driven by housing costs, which rose by 5.0 percent in the 12 months to July due to rising costs for new dwellings. The ABS head of price statistics Rachael McCririck said new dwelling prices rose 5.7 percent in the 12 months to July as builders passed on higher costs for materials and labor.