Trimmed Mean Inflation Holds Above Target as Rate Hike Bets Rebuild

Australia's trimmed mean inflation rate held steady at 3.6% year over year, remaining above the Reserve Bank of Australia's target band of 2 to 3%. This measure is closely watched by the central bank as it strips out volatile price moves and provides a more accurate picture of underlying inflationary pressure.

Despite the headline inflation rate cooling to 3.5% from 3.8%, the trimmed mean reading is considered more significant, with its 0.5% monthly print being the strongest in over a year.

Housing market data showed household spending rose 1.1% in July, marking the fourth month in five above 1%. According to Market Analyst Matt Simpson, this indicates 'the economy is heating up once again', leading some Reserve Bank of Australia members to discuss a hike at their last meeting.

As a result, markets shifted from debating rate cuts to pricing tightening risk into year-end. Forecasts are now split, with National Australia Bank calling for a hike, Deutsche Bank penciling one in, and ANZ, Commonwealth Bank of Australia, and Westpac expecting a hold.