The S&P/ASX 200 Index (ASX: XJO) was already in the red today at 11.30am AEDT.
Then, over the next two minutes, the benchmark index dropped another 0.2% to be down 0.8% in intraday trade.
Why?
Well, ASX 200 traders look to have gotten a bit jittery over the latest Australian inflation data covering the month of July. That data was released by the Australian Bureau of Statistics (ABS) at, you guessed it, 11.30am.
Here's what's happening with inflation down under and how that might impact the Reserve Bank of Australia's interest rate settings.
ASX 200 dips as inflation remains sticky
According to the ABS, Australia's monthly Consumer Price Index (CPI) indicator rose 3.5% in the 12 months to July.
That's down from the 3.8% annual rate of inflation reported in June, which is the trend we're looking for. But it looks to have put some pressure on the ASX 200, as inflation still came in a bit higher than consensus expectations of a 3.4% annual increase.
The biggest factors driving ongoing annual price rises in Australia were housing, up 4.0%; food and non-alcoholic beverages, up 3.8%; alcohol and tobacco, up 7.2%; and transport, up 3.4%.
Expert commentary
Commenting on the CPI data throwing up some headwinds for the ASX 200 this afternoon, Leigh Merrington, ABS acting head of prices statistics, said:
CPI inflation is often impacted by items with volatile price changes like in automotive fuel, fruit and vegetables, and holiday travel. It can be helpful to exclude these items from the headline CPI to see underlying inflation, which was 3.7% in July, down from 4.0% in June.
Renters are still doing it tough, with rents up 6.9% for the year to July. Though that's down from a rise of 7.1% in the 12 months to June.
As for homebuyers, the ABS said the annual rise in new dwelling prices has remained around 5.0% since August 2023, with builders passing on higher labour and materials costs.
The lower overall increase in housing costs for the year to July was largely due to new commonwealth and state rebates, which saw electricity prices come down 5.1% in the 12 months to July after posting an annual rise of 7.6% in June.
According to Merrington:
The first instalments of the 2024-25 Commonwealth Energy Bill Relief Fund rebates began in Queensland and Western Australia from July 2024 with other states and territories to follow from August.
In addition, state-specific rebates were introduced in Western Australia, Queensland and Tasmania. Altogether these rebates led to a 6.4% fall in the month of July. Excluding the rebates, electricity prices would have risen 0.9% in July.
With this latest data in mind, I don't expect ASX 200 investors will see the RBA cut interest rates when the central bank announces its next decision on 24 September.
But if inflation continues to trend lower, those first rate cuts shouldn't be too much longer in coming.
