The Melbourne Institute\u2019s monthly inflation measure rose by 0.9% in July, up from 0.1% in June. This marks the most substantial monthly increase in 19 months, with annual inflation climbing to 2.9% from 2.4% in June.<\/p>\n
Trimmed mean inflation also increased by 0.8% month-over-month in July, again the largest rise in 19 months, with a yearly increase of 2.6%. These figures oppose the Reserve Bank of Australia’s expectations for a rate cut.<\/p>\n
The data from the Melbourne Institute is not as respected as other inflation statistics. Nonetheless, it suggests renewed price pressures in the country’s economy.<\/p>\n
The new inflation data from the Melbourne Institute is a surprise, showing prices jumped 0.9% in July. This sharply reverses the cooling trend we saw in June and pushes the annual rate up to 2.9%. This unexpected heat will make traders question the market’s recent bets on an upcoming Reserve Bank of Australia (RBA) rate cut.<\/p>\n
We must remember this is a private survey and not the official CPI that the RBA prioritizes. The last official release for the second quarter of 2025 actually showed inflation easing slightly to a 3.4% annual rate, which had fueled hopes for a cut. This new report challenges that narrative but doesn’t completely overturn it until we see official data confirm the trend.<\/p>\n
Looking at the broader picture, the labour market remains tight, with the most recent data from July showing the unemployment rate holding firm at 3.9%. This underlying economic strength, combined with a potential re-acceleration in prices, supports the view that the RBA will remain on hold. A rate cut in the coming months now seems much less likely than it did just a week ago.<\/p>\n
Looking back at the RBA\u2019s behaviour in 2024, we know they are extremely cautious about cutting rates too early and risking a second wave of inflation. They will likely dismiss this single private survey and wait for the official third-quarter CPI report in late October before signaling any major policy shift. For now, their stance will almost certainly be “higher for longer.”<\/p>\n
For interest rate traders, this means unwinding bets on rate cuts for late 2025 or early 2026. We should expect short-term bond yields to rise as the market reprices the odds of a cut happening this year to nearly zero. Futures contracts tied to the RBA’s cash rate will likely see a hawkish adjustment in the coming days.<\/p>\n
The increase in uncertainty is a key takeaway, making options strategies more attractive. Higher implied volatility in the Australian dollar and bond markets is expected. Traders could look at buying straddles or strangles to profit from a larger-than-expected move, as the debate between a resilient economy and sticky inflation intensifies.<\/p>\n
This new data should also provide a tailwind for the Australian dollar. With other central banks still leaning towards easing, a more hawkish RBA makes the Aussie more attractive. We could see AUD\/USD find support and climb, so traders might consider long positions in the currency or buy call options.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Melbourne Institute inflation jumps 0.9% in July, highest in 19 months, challenging rate cut expectations.<\/p>\n","protected":false},"author":62,"featured_media":16964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-28036","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t