Inflation appears to be off to a soft start in the September quarter, allowing the Reserve Bank to remain in wait-and-see mode on interest rates.

The TD Securities/Melbourne Institute monthly inflation gauge rose by 0.2 per cent in July, following a flat result in June.

The gauge rose by 2.6 per cent in the 12 months to July, following a 3.0 per cent increase in the year to June.

Price rises for gas, electricity and property rates were offset by falls in water and sewerage, clothing and footwear and alcohol and tobacco, the report said.

The September quarter appeared to be off to a soft start, following stronger-than-expected official consumer price index figures in the June quarter, TD Securities head of Asia-Pacific research Annette Beacher said.

Underlying inflation, which the RBA focuses on when considering interest rate moves, came in at 2.8 per cent, at the top of the central bank’s two-to-three per cent inflation target band.

“We are seeing a soft start to the September quarter with this July report,” Ms Beacher said.

“At this stage we treat this signal with caution and await the August inflation gauge report.

“Ongoing caution from the RBA in recent weeks speaks to us that the board can pause for another month and assess the improving global economic outlook as well as more mixed data news closer to home.

“Overall, we expect a familiar narrative about sub-trend growth lying ahead, inflation being `within target’, the high Australian dollar being inconsistent with the fall in key commodity prices, and that it is prudent that there is a `period of stability in interest rates’.”

The RBA announces its August interest rate decision on Tuesday.