Australian Consumer Prices Jump in July, Cooling Rate Cut Hopes

By Stella Qiu and Wayne Cole

SYDNEY (Reuters) – Australian consumer prices jumped by far more than forecast in July as electricity costs spiked due to teh timing of government rebates, while core inflation also jumped in a blow to hopes of a rate cut as soon as next month.

Investors pared the chance for an easing from the Reserve Bank of Australia next month to just 22% from about 30% before the data, even though thay are still confident of a move in November.

Data from the Australian Bureau of Statistics on Wednesday showed it’s monthly consumer price index (CPI) rose 2.8% in July compared to a year earlier, up from 1.9% in June and well above median forecasts of 2.3%.

The Australian dollar got a brief lift from the data but was last flat at $0.6494, while three-year government bond futures clawed back earlier losses to be down just 2 ticks at 96.57.

“We don’t anticipate today’s surprise increase in inflation will have a material impact on markets and the broader economy,” said Russel chesler, head of investments and capital markets at VanEck.

“This inflation spike, combined with the recency of the last rate cut and continued strength of the labor market, reinforce our expectation that another rate cut is unlikely before November.”

The trimmed mean measure of core inflation ran at an annual 2.7% in July, up from 2.1% in June. A measure excluding volatile items and holiday travel climbed to 3.2%, from 2.5%.

In the month, CPI rose 0.9% from June as electricity prices jumped 13% and holiday travel and accommodation costs surged.