Australia’s inflation for August expected to rebound

The Australian monthly Consumer Price Index is expected to rise 5.2% YoY in August, marking the first reacceleration since April. This could be crucial for the Australian Dollar (AUD) and the Reserve Bank of Australia (RBA), which will hold its October monetary policy meeting next week.

Inflation in Australia peaked in December 2022, with an 8.4% year-on-year increase. A rebound in August could increase the expectation of another rate hike from the RBA, although not necessarily at the upcoming meeting next week.

The market does not favor a rate hike at the October 3 meeting, which will be Michele Bullock’s first meeting as a Governor. The odds of another rate hike rise to 85% for the first quarter of next year.

If the CPI reading shows inflation not slowing down and accelerating further above the 2%-3% target range, the Australian Dollar could receive a boost as markets consider further tightening ahead.