SYDNEY, Aug 26 (Reuters) – Australian consumer prices rose more than expected in July as fuel and travel costs jumped, data showed on Wednesday, while core inflation also exceeded forecasts and added to the risk of another hike in interest rates.
The Australian dollar edged up 0.1% to $0.7171, while three-year government bond futures trimmed an earlier rally to be flat at 95.44. Market participants nudged up the chance of a rate hike from the Reserve Bank of Australia next month to 27% from 17%, while a move by February next year is priced at 80%.
Data from the Australian Bureau of Statistics showed its monthly consumer price index (CPI) rose 1.0% in July from June, exceeding forecasts of a 0.8% rise, as fuel prices jumped 7.5% after falling for three months.
The annual pace slowed to 3.5% from 3.8%, as an outsized increase from last year dropped out of the calculation. Median forecasts had expected a slowdown to 3.3%.
The trimmed mean measure of core inflation increased by 0.5% in the month, the biggest increase in a year and well above forecasts for 0.3%, leaving the annual pace at 3.6%.
“With this inflation result, we are of the view that there will have to be at least one more RBA hike this year to temper inflation,” said Russel Chesler, VanEck’s head of investments and capital markets.
The RBA held interest rates steady at 4.35% for a second meeting this month after three rate hikes this year aimed at taming inflation. Policymakers have warned that they would hike again if inflation risks materialise.
It had forecast the trimmed mean inflation to slow to 3.3% by the end of the year.
(Reporting by Stella Qiu and Wayne Cole; Editing by Jacqueline Wong and Thomas Derpinghaus)
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