Australia's inflation cooled in August, prompting traders to reduce their bets that the Reserve Bank of Australia will raise interest rates again at its next meeting.

Data released by the Australian Bureau of Statistics on Wednesday showed that the closely watched trimmed mean consumer price index rose 0.2% month-on-month, below the 0.5% gain recorded in July.

This core inflation gauge rose 3.6% year-on-year, in line with analyst forecasts and unchanged from the previous month's annual pace.

After the data was released, the Australian dollar fell 0.3% against the US dollar, while the yield on three-year Australian government bonds, which is sensitive to monetary policy expectations, dropped 9 basis points to 4.88%, as traders scaled back expectations that the RBA would raise rates again in the near term.

Swaps market pricing indicated roughly a 28% probability that the RBA would hike again at its November meeting, down from about 40% before the data was published.

Inflationary pressures in Australia have risen again since late last year, driven by strong demand combined with constrained productive capacity.

A surge in energy prices caused by the US-Iran war has further intensified these inflationary pressures.

Faced with stubborn inflation, the RBA has already raised rates four times this year, with the policy rate after this week's increase reaching its highest level since late 2011.