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By Stella Qiu

SYDNEY (Reuters) -Australian consumer prices rose in August at the fastest annual pace in a year, but a key measure of core inflation eased, keeping the door open to a further cut in interest rates.

Still, the beat on the headline figure sent the Australian dollar up 0.3% to $0.6616, while three-year government bond futures fell 5 ticks to 96.48, the lowest in three weeks.

Investors doubled down on bets that the Reserve Bank of Australia will skip a move in interest rates next week given the recent flow of data has been on the slightly strong side. Prospects for a move at its next meeting in November also faded a little to 60% from almost 70% before the data.

Data on Wednesday from the Australian Bureau of Statistics showed the monthly consumer price index (CPI) rose 3.0% in August from a year earlier and up from 2.8% in July, mostly due to base effects. It came in just above median forecasts of 2.9%.

For the month, CPI was flat as electricity prices fell 6.3% on new government rebates and holiday travel and accommodation dropped 3.5%.

The key trimmed mean measure of core inflation ran at an annual 2.6% in August, down from 2.7% in July. However, a measure excluding volatile items and holiday travel climbed to 3.4% from 3.2%.

"This is a partial indicator that has a lot of volatility because it's not a complete sample of all of the items of the CPI in any one month," said Paul Bloxham, HSBC's chief economist for Australia, New Zealand and global commodities.

"This doesn't change our view that the RBA we think will be firmly on hold next week and we think it's likely that they'll deliver a cut in November and February next year."

Indeed, the RBA has downplayed the importance of the monthly CPI data, saying the series remained too volatile, with interest rates only cut this year in February, May and August after assessing the quarterly inflation figures.

On Monday, Governor Michele Bullock said Australia's economy was in a good place, with inflation expected to return to the mid-point of the target band of 2% to 3%, and the labour market nearing full employment.

The central bank had forecast headline inflation, which ran at 2.1% last quarter, to pick up to 3.1% by the middle of next year, as electricity rebates fade, but core inflation is expected to stay anchored around 2.6% over the coming years.

All up, that suggested little urgency to cut rates for the central bank at the next policy meeting September 29-30, since the labour market has stayed resilient, with unemployment at a historically low rate of 4.2%.

Wednesday's report provided some updates on the services sector, which showed services inflation was flat in the month. New dwelling prices rose 0.7% in the 12 months to August, up from 0.4%.

Rents rose 3.7% in August, the lowest annual growth since late 2022.

"Today's inflation updates... argues for the RBA to continue its cautious rate cutting cycle," said Tony Sycamore, analyst at IG. "September (is) a No - but November still a Go. "