Australian consumer prices rose in August at the fastest annual pace in a year:

A key measure of core inflation, the trimmed mean, eased to 2.6% from 2.7% in July. A measure excluding volatile items and holiday travel climbed to 3.4% from 3.2%.

The prospect of an RBA rate cut next week, at the September 29-30 meeting diminished on the hot headline.

The Australian dollar jumped:

While you can rule out a rate cut next week, even the chance of a November cut was trimmed to around 60%, from about 70% before the data.

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The RBA has played down the role of monthly CPI data, saying it was too volatile, and noted that recent rate cuts in February, May and August were based on quarterly inflation. Governor Michele Bullock said the economy was in solid shape, with inflation set to move back into the 2–3% target range and the labour market close to full employment.

The bank expects headline inflation, which was 2.1% last quarter, to rise to 3.1% next year as energy rebates expire, while core inflation should hold near 2.6%.

With unemployment at 4.2%, the RBA sees little urgency to cut rates at its September 29–30 meeting.