RBA Hawkish Shift Sets Stage for August Rate Hike

The Reserve Bank of Australia's (RBA) minutes from its latest meeting were unexpectedly hawkish, indicating that inflation risks are skewed to the upside. This was confirmed by recent CPI inflation data from the Australian Bureau of Statistics (ABS), which showed headline CPI at 3.5% and policy-relevant trimmed mean inflation at 3.6%. The largest contributor to annual inflation in July was Housing, with a 5.0% rise driven by higher costs for new dwellings.

New dwelling prices increased by 5.7% over the past year due to builders passing on higher costs for materials and labor, according to Rachael McCririck, ABS head of price statistics. The data suggests that the RBA's September board meeting may be live with a potential rate hike in August.

Trimmed mean inflation was above the RBA's latest forecast, and quarterly growth has reaccelerated, as illustrated by charts from Alex Joiner, chief economist at IFM Investors. Joiner noted on X (Twitter) that 'these data do nothing to suggest that the RBA's September board meeting is anything but live'.