Inflation down to 3½pc in July, but...

Inflation above taregt

The ABS released the July inflation figures, which saw annual inflation fall from 3.8 per cent to 3½ per cent.

This was slightly above the median market forecast for a drop to 3.3 per cent, as end of year price resetting added to inflationary pressures. 

Trimmed mean inflation also didn't slow, remaining at 3.6 per cent, which will be of concern to those setting fiscal and monetary policy:

Source: ABS

The biggest contributor to inflation over the past year continues to be housing (5 per cent).

The cost of new dwellings continued to rise in July, though with major developers collapsing in real time presumably the inflation pressures will be easing forthwith as pricing power fades. 

In the monthly figures fuel prices rose 7½ per cent in July after three monthly falls, helping to juice the headline result.

Overall, this was a worse than expected result, and sees the odds of a rate hike in September rising to around a 1 in 3 possibility.

James Foster ran through the figures in more detail here:

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