The rate of inflation increased in July but it's still within the Reserve Bank of Australia's two to three per cent target band.
The TD Securities/Melbourne Institute Monthly Inflation Gauge was 0.5 per cent in July, following a flat result in June and a 0.2 per cent rise in May.
The rate for the 12 months to July was 2.7 per cent, up from 2.4 per cent in June.
Price rises for automotive fuel, as well as holiday travel and accommodation were the main contributors to the July's higher inflation rate.
TD's estimate of the trimmed mean measure of underlying inflation, which filters out extra-large rises and falls, recorded annual growth of 3.1 per cent.
TD Securities head of Asia-Pacific research Annette Beacher said inflation pressures look to be increasing but it may not last.
"After slightly stickier-than-expected underlying inflation in the June quarter, we are seeing upside inflation pressures in the September quarter with this July report," she said.
"However, there may be base effects at play due to the soft July reading last year, hence the jump in the annual rate to 3.1 per cent.
"At this stage, we treat this signal with caution and await the August gauge report."
Ms Beacher said she expects the Reserve Bank of Australia (RBA) to cut the cash rate to a fresh record low of 2.5 per cent on Tuesday.
"The RBA clearly wants to keep downward pressure on the Australian dollar to assist with the rebalancing of the economy away from mining and towards the non-mining sector," she said.
"The evidence so far is that the non-mining sector remains too weak to support the economy while the impetus from the investment boom drops out of the growth calculations."
A lower currency makes export prices more competitive and the local dollar has lost more than 12 US cents since early May.
