Australia inflation tops forecasts in July, adding to rate hike risk

Australian consumer prices rose more than expected in July, driven by a sharp jump in fuel and travel costs, according to data released on August 26, 2026. The hotter-than-forecast inflation figures, which also showed core inflation accelerating, have significantly increased the likelihood that the Reserve Bank of Australia will raise interest rates again.

The monthly consumer price index from the Australian Bureau of Statistics increased by 1.0 percent in July from June, surpassing market expectations of a 0.8 percent rise. On an annual basis, inflation slowed to 3.5 percent from 3.8 percent, but this was still above forecasts for a sharper decline to 3.3 percent. The trimmed mean measure of core inflation, which the RBA closely watches, rose by 0.5 percent over the month, marking its largest increase in a year and beating forecasts for a 0.3 percent gain. The annual pace for this core measure held steady at 3.6 percent.

The data prompted immediate market reactions. The Australian dollar strengthened, while government bond futures fell. Traders quickly priced in a higher chance of a fourth rate hike from the RBA in September, with the probability rising to 36 percent from 17...