Australian headline inflation eased to 3.5% in July from 3.8% in June, coming in above economists’ expectations. Underlying inflation remains high at +3.6% annually, while the monthly trimmed mean rose 0.5%, increasing concerns that inflation is not returning quickly enough to the RBA’s target. Housing, food and transport costs drove inflation, with fuel prices jumping 7.5% during July due to higher global oil prices and the partial unwinding of fuel excise relief.

Economists said persistent services inflation increased the risk of another rate hike, potentially as early as the RBA’s September meeting, although views remain divided. Upcoming GDP and employment data will be key to the decision.