Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 3.5% in July, down from 3.8% in June.

The figure was slightly above forecasts of 3.4%, leading markets to lengthen the odds of a first easing from the Reserve Bank of Australia in November to 48.4%, from 58% before. The Australian dollar hit an eight-month high of $0.6813 and the three-year bond yield was up 4 ticks to 3.559%.

On a monthly basis, the CPI was flat in July from June as costs for electricity and petrol fell, but rents, food and gas prices rose.

Electricity prices fell 6.4% in the month due to government rebates that began in Queensland and Western Australia last month, said Leigh Merrington, ABS acting head of prices statistics, adding that other states and territories will follow from August.

"Excluding the rebates, electricity prices would have risen 0.9 per cent in July," Merrington said.

Headline inflation is expected to be back in the RBA's target band of 2% to 3% later this year due to the electricity subsidies from the federal and state governments, although the central bank has said it would look through temporary factors and focus on underlying inflation.

A closely watched measure of core inflation, the trimmed mean, slowed to an annual 3.8%, from 4.1% in June. The CPI excluding volatile items and holiday travel dipped to 3.7%, from 4.0%, the lowest reading since early 2022.

As a result, policymakers have taken the unusual step of giving forward guidance that rates are unlikely to be lowered in the near-term.

Markets are still fully pricing in a rate cut this year, in part because the Federal Reserve is near-certain to start easing policy next month and more cuts are expected in Canada, Europe and New Zealand.

A surging Australian dollar, which is hovering close to the highest this year, should also help lower imported inflation.