Inflation cools to 3.5 per cent but key measure watched by RBA steady at 3.6 per cent for year to July

Fresh data shows the crucial inflation figure followed by the Reserve Bank remained steady at 3.6 per cent for the year to July.

Trimmed mean inflation — which the central bank relies on when making interest rate decisions — was at the same level as June, according to the Australian Bureau of Statistics on Wednesday.

Headline inflation eased from 3.8 per cent to 3.5 per cent despite signs tensions in the Middle East remained high between the US and Iran. That index measures the direct pain on Aussie wallets.

Fuel prices were up 7.5 per cent as the Federal Government’s temporary tax relief was terminated.

VanEck head of capital markets Russel Chesler said the inflation fire was still smouldering.

“With this inflation result, we are of the view that there will have to be at least one more RBA hike this year to temper inflation,” he said.

“The inflation fight is far from won. We remain firmly of the view that inflation is becoming entrenched and has little chance of returning to the 2.5 per cent midpoint of the RBA’s target range by late 2027.”

Financial markets overnight expected no change to interest rates when the RBA meets late in September. A rate hike by the end of the year was priced as a 60 per cent chance.

Minutes from the RBA’s August board meeting released this week showed some progress in slowing the economy to get inflation under control. Yet the central bank remained concerned inflation “was still too high”.

A rate rise was considered but the RBA opted to hold the cash rate at 4.35 per cent in the hope that three increases so far this year would be enough to fight inflation.