Inflation posted a resurgence in July, with consumer prices rising 2.8 per cent annually, according to the monthly figures from the Australian Bureau of Statistics (ABS).

That’s an increase from the 1.9 per cent rise in the consumer price index recorded in June, and well above the 2.3 per cent expected by economists, according to a poll by Reuters.

“This is the highest annual inflation rate since July 2024, following several months of easing inflation,” ABS head of prices statistics Michelle Marquardt said.

The annual trimmed mean, a measure of underlying inflation, also increased, to 2.7 per cent in July from 2.1 per cent in June.

In the minutes of its August meeting, released on Wednesday, the Reserve Bank noted that headline inflation was expected to increase over the second half of this year, before returning to the mid-point of the target band.

The central bank’s forecasts put the headline inflation rate at 3 per cent in December.

“While most of the jump in headline inflation in July reflected volatile components that the RBA will ignore, underlying inflation also rebounded,” Capital Economics head of Asia-Pacific Marcel Thieliant wrote.

Capital Economics has maintained its forecast for three more interest rate cuts by the RBA, but Mr Thieliant noted “the risks are tilted towards less easing”.

“While our base case remains that the [central] bank will eventually cut rates to 2.85 per cent, the latest inflation data may warrant a less expansionary stance.”

Betashares chief economist David Bassanese, however, described the number as “an absolute shocker” and said the biggest disappointment was the “ugly” increase in the trimmed mean.

Electricity rebate roll-off contributes to price pick-up

Electricity costs rose 13.1 per cent in the 12 months to July, the ABS said, compared to a 6.3 per cent annual fall recorded a month earlier.

The month-to-month volatility in prices reflects the roll-off of government rebates, with households in New South Wales and the ACT not receiving payments of the extended Commonwealth Energy Bill Relief Fund in July — their bill relief is instead due in August.

“This means that those households had higher out-of-pocket costs for electricity in July. In addition to this, prices rose due to annual electricity price reviews coming into effect,” the ABS noted.

The impact of electricity prices was also discussed by the RBA’s monetary policy board at its August meeting, as a driver of the forecast temporary increase in headline inflation.

“This volatility reflected the legislated unwinding of electricity rebates, which would boost headline inflation over 2025 and 2026,” the RBA minutes read.