Australian inflation climbs to 3.5%, fuels rate-hike bets

Australia's inflation remains hotter than expected, with July annual CPI around 3.5% and monthly gains of about 1.0%, driven by housing costs, food and beverages, and recreation and culture, keeping pressure on the Reserve Bank to consider another rate hike. Core or trimmed-mean inflation sits at about 3.6%, underscoring persistent price pressures even as the overall rate softens from the June pace. Market-sensitive factors include a 4.75% pay uplift for award workers from July 1, which could lift market services inflation and complicate the central bank’s path back to its 2–3% target. Analysts and officials highlighted upside risks to inflation after the July figures, reinforcing the case for tighter policy despite mixed trends in energy and transportation prices. The data have prompted renewed scrutiny of policy timing, with expectations split on whether the RBA will raise rates again in the near term. Taken together, the figures paint a picture of stubborn domestic inflation that could entrench higher borrowing costs for Australian borrowers.