Australia's July CPI Expected to Ease to 3.2-3.3% as Traders Focus on Trimmed Mean Near 3.5%
Key Takeaways
- •The Australian Bureau of Statistics will release the July monthly CPI indicator at 11:30am AEST.
- •Headline inflation is expected to fall to between 3.2% and 3.3% year on year from 3.8% in June.
- •All four major banks expect the trimmed mean to ease to around 3.5% from 3.6%.
- •Westpac says the trimmed mean may still rise 0.4% month on month, slightly above the RBA’s projection track.
- •The data will help shape expectations for the Reserve Bank’s September meeting after the cash rate was held at 4.35% on 11 August.
Developing news, if confirmed: a Russian media report says there is an Iran-US deal.
On with the inflation 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.
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 the July monthly CPI indicator today at 11:30am AEST / 01:30 GMT / 21:30 US Eastern time
- Headline inflation is 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 the 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 the trimmed mean, the RBA's preferred underlying measure, to ease to around 3.5% from June's 3.6%
- Westpac separately flags the trimmed mean rising 0.4% month on month, slightly above the RBA's own 3.6% projection track
- The 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 CPI indicator (expected values and priors) this morning at 11:30am AEST, in what economists and currency traders are treating as the most consequential domestic data point of the week. The indicator has been published in its complete monthly form since late 2022, giving policymakers and markets a faster read on price pressures than the quarterly CPI series, though the quarterly release remains the formal benchmark for the RBA's 2-3% inflation target.
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, however, that 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 — a level that would still sit above the top of the RBA's 2-3% target band, which is why the underlying number rather than the headline is treated as the policy signal. Westpac has gone further, forecasting that 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 on which all four majors had aligned after June quarter CPI data removed the immediate case for further tightening. That quarterly print showed headline inflation at 3.8% and the 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. The September-quarter CPI, published after the quarter closes, will then provide the fuller quarterly benchmark the RBA formally uses to judge progress back toward the target band.
The next Reserve Bank of Australia meeting is in late September.
