Australia CPI Inflation Beats Expectations in July, Raising Concerns of Further Rate Hikes
Australia's consumer price index (CPI) inflation grew more than expected in July, driven by sticky fresh food costs. However, softer housing and energy costs led to a slight decline in core inflation, fueling concerns that the Reserve Bank could raise rates to combat stubborn inflation.
According to data from the Australian Bureau of Statistics, CPI inflation grew 3.5% year-on-year in July, higher than expectations of 3.4% but lower than the prior month's 3.8%. Core CPI inflation, which excludes volatile items, fell to 3.7% from 4% in the previous month.
The increase in headline inflation was mainly driven by higher fresh food prices, while housing costs retreated slightly and electricity rebates helped ease energy costs. Despite the slight decline in core inflation, the reading still exceeded the RBA's annual target of 2% to 3%, heightening concerns over potential interest rate hikes.
Following the inflation data, the Australian dollar rose 0.2%, while the stock index dropped 0.7%. Analysts anticipate that the central bank will maintain higher rates for a longer period and may start cutting rates in late 2025.
In conclusion, the higher-than-expected inflation in Australia has raised concerns about further rate hikes by the Reserve Bank. Investors should closely monitor central bank policies and economic indicators to make informed decisions about their investments and finances.