Australian Aug inflation picks up as expected, rate outlook little changed

By Stella Qiu

SYDNEY (Reuters) -Australia’s inflation accelerated in August, driven by a surge in fuel prices, but the gain was in line with expectations and a measure of core inflation eased further, lessening any immediate pressure for the central bank to hike interest rates again.

The Australian dollar was little changed at around 64 cents and three-year government bond yields eased 3 basis points to 4.029%.

Markets also slightly increased the bets for a fourth straight rate pause from the Reserve Bank of Australia next month to 92%, from 87% before. They continue to see a good chance of one final hike by May next year.

Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose 5.2% in the year to August, in line with forecasts and up from 4.9% the previous month.

CPI rose by 0.6% in August on a monthly basis, accelerating from a 0.3% gain in July.

A closely watched measure of prices excluding volatile items and holiday travel eased to 5.5% from 5.8%.

“Today’s inflation data won’t move the dial ahead of the October RBA meeting, where the RBA is widely expected to stay on hold,” said Tony Sycamore, an analyst at IG.

“However jobs data for September and Q3 inflation data will decide whether the RBA hikes rates in November or keeps its cash rate on hold into year end.”

The big drivers last month were fuel prices, which jumped 13.9% in the biggest annual rise since November 2022, and electricity prices, which continued to rise briskly at an annual rate of 12.7%.

Insurance prices rose 8.8%, up from 8.5% the previous month, while rent inflation picked up to 7.8% from 7.6%, pointing to the persistently high services inflation.

The Reserve Bank of Australia has jacked up rates by 400 basis points since May last year to an 11-year high of 4.1% and warned that rates may need to rise further to contain inflation.

(Reporting by Stella Qiu; Editing by Himani Sarkar and Muralikumar Anantharaman)