RBA Rules Out Rate Cuts Until Inflation Tamed

The Australian Bureau of Statistics (ABS) released its latest consumer price index (CPI), revealing that both headline CPI and trimmed mean inflation remain above the Reserve Bank of Australia's (RBA) target range. Headline CPI increased by 3.5% in the 12 months leading up to July, down from 3.8% in June, while trimmed mean inflation was up 3.6%, unchanged from the previous year.

The RBA has raised the official cash rate three times this year, taking it to 4.35%. Despite inflation still being above target, the central bank kept rates on hold at its last two meetings, signaling that it wants more time to assess how previous rate hikes are affecting the economy.

Many Australians had been hoping for a rate cut, but the RBA's August meeting minutes revealed that cutting rates is off the table until inflation returns to its target band of 2% to 3%. RBA Governor Michele Bullock said after the meeting that the bank would consider raising interest rates again if needed to bring down inflation in a timely way.

The largest contributors to July's print were housing, up 5%, year-over-year, followed by clothing and footwear, education, and alcohol and tobacco products. New dwelling prices eased slightly, with an increase of 5.7% in the 12 months to July, compared with 5.8% in June.