What happened
Australia's monthly CPI rose 1.0% in July, pushing annual inflation to 3.5%, above market expectations. Core trimmed mean inflation increased 0.5% for the month to 3.6% annualised. In response, the ASX 200 fell 0.4% to 9,128, while 10-year government bond yields traded near 5% as markets increased the chance of a September rate hike to 27%.
Why it matters here
Persistent underlying inflation complicates the Reserve Bank's rate trajectory and directly impacts Australian share valuations. Higher bond yields weigh on interest-sensitive sectors like tech and real estate, while elevating mortgage pressures for households. For local equity investors, sticky services and energy prices threaten corporate margins, keeping defensive assets and cash income attractive in the near term.
What to watch
The Reserve Bank's upcoming September policy decision and upcoming June quarter national accounts data to see whether broad consumer spending is slowing enough to cool core inflation.
Source
tradingeconomics.com