Before I start …. the big developing news, if true:
On with the preview!
A soft headline print carries limited market weight given the widely flagged base effect, so trader focus will sit squarely on the trimmed mean. A reading at or below the 3.5% consensus would reinforce pricing for an RBA hold in September and could see the Aussie dollar give back some ground on reduced tightening expectations. A hotter than expected trimmed mean, closer to the 0.4% month on month pace flagged by Westpac, risks reviving talk of further policy tightening later in the year and would likely support AUD buying. FX desks have flagged the release as the week’s key domestic catalyst, with AUD crosses expected to see the sharpest reaction to any core inflation surprise rather than the headline number itself.
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The July CPI’s headline drop is a base effect story, but the trimmed mean print is the one that will actually move the RBA’s dial.
Summary:
- ABS releases July monthly CPI indicator today at 11:30am AEST/0130 GMT/ 2130 US Eastern time
- Headline inflation forecast to fall sharply to between 3.2% and 3.3% year on year, down from June’s 3.8%, as a 1.3% price rise from July last year drops out of the annual calculation
- CBA and ANZ forecast headline at 3.2%, NAB and Westpac at 3.3%; a reading at the lower end would be the softest headline rate since August 2025
- All four major banks expect trimmed mean, the RBA’s preferred underlying measure, to ease to around 3.5% from June’s 3.6%
- Westpac separately flags trimmed mean rising 0.4% month on month, slightly above the RBA’s own 3.6% projection track
- Data follows the RBA’s decision to hold the cash rate at 4.35% on 11 August, after June quarter CPI removed the case for a further hike; today’s print will help shape expectations into the September board meeting
Australia’s Bureau of Statistics releases its July monthly (expected and priors at that link) Consumer Price Index indicator this morning at 11:30am AEST, in what economists and currency traders are treating as the most consequential domestic data point of the week.
Headline annual inflation is expected to fall sharply, with all four major banks forecasting a drop from June’s 3.8% reading. CBA and ANZ have pencilled in 3.2%, while NAB and Westpac see 3.3%. Should the softer end of that range be confirmed, it would mark the lowest headline inflation rate since August 2025. Economists caution the improvement is largely mechanical, driven by a 1.3% price rise from July 2025 dropping out of the annual comparison window, rather than a genuine acceleration in disinflation.
The more closely watched figure is the trimmed mean, the measure the RBA uses to judge underlying price pressure once volatile items are stripped out. The major banks are aligned in expecting this gauge to ease modestly to around 3.5%, down from 3.6% in June. Westpac has gone further, forecasting the trimmed mean will still rise 0.4% on a month on month basis, a pace it notes remains slightly above the RBA’s own published projection track.
The release lands just over two weeks after the Reserve Bank held its cash rate at 4.35% on 11 August, a decision all four majors had aligned on after June quarter CPI data removed the immediate case for further tightening. That quarterly print showed headline inflation at 3.8% and trimmed mean holding at 3.6%, prompting Westpac, previously the lone hawk among the majors, to abandon its call for additional rate rises.
Today’s monthly indicator will feed directly into expectations for the RBA’s September board meeting. An in-line or softer trimmed mean would strengthen the case for an extended hold, while any upside surprise in the underlying reading, even alongside a lower headline number, risks reopening debate about further tightening. Currency markets are positioned to react more to the core inflation outcome than to the anticipated headline decline, given the latter’s well flagged base effect origin.
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Next Reserve Bank of Australia meeting is late September:
This article was written by Eamonn Sheridan at investinglive.com.