The benchmark S&P/ASX200 index on Wednesday closed up 15.9 points to 6823.2, a 0.23 per cent rise, while the broader All Ordinaries finished up 12.9 points, or 0.18 per cent, to 7038.1.
The ASX200 was down as much as 0.4 per cent in morning trading, but jumped 24 points in the three minutes after the Australian Bureau of Statistics revealed consumer prices had "only" risen 6.1 per cent in the 12 months to June.
"Maybe a bit of relief that the CPI wasn't as bad as feared, and the RBA only is going to raise rates 50 basis points," said Betashares chief economist David Bassanese.
"Fifty's still a big move, and we've still got a pretty tricky inflation problem to deal with, but they just don't need to go as aggressively as what the market feared."
TD Securities, which had predicted the RBA would hike rates by 75 basis points on August 2, changed its call to a 50 basis point hike. NAB said the inflation result "locks in" a 50bp hike.
The ASX's 11 official sectors were again mixed on Wednesday, with five gaining ground, five losing it and tech shares flat.
Mining was the worst performer, falling 1.2 per cent. BHP and Rio Tinto both dropped 2.0 per cent, to $37.52 and $96.98 respectively.
After the market closed Rio Tinto announced it had made $US15.6 billion in underlying earnings in the half-year to June 30, but would be cutting its dividend in half from last year as the trading environment had become more challenging.
Goldminers Silver Lake Resources and St Barbara both gained ground on fourth-quarter updates, rising 6.0 and 3.3 per cent respectively, while nickel-lithium miner IGO rose 0.2 per cent on its update.
The heavyweight financial sector was up 1.1 per cent, with CBA gaining 2.2 per cent to $98.90, NAB rising 1.4 per cent to $30.13, Westpac adding 1.3 per cent to $21.41 and ANZ up 0.4 per cent to $22.73.
The battered buy now, pay later space had a phenomenal day, blasting off in the final two hours of trading for reasons that weren't immediately clear.
Sezzle shares rocketed 95.8 per cent to a more than two-month high of 70.5c before being placed in a trading halt to respond to a price and volume query letter from the ASX.
Zip gained 21 per cent to a three-month high of $1.24. Laybuy soared 79 per cent to 7.7c. Openpay and Payright were up 31.4 and 27.8 per cent, respectively.
Healthcare was the best-performing sector, boosted by CSL which was up 1.8 per cent to $291.83.
The Aussie dollar was buying 69.34 US cents, from 69.69 US cents at Tuesday's close.
Looking forward, the US Federal Reserve will announce how fast rates are rising in the world's biggest economy at 4am AEST on Thursday.
While a 75 basis point rise is widely expected, Mr Bassanese told AAP that he wouldn't rule out a 100 basis point one.
"All the data, the inflation data is looking very worrisome, and the equity market's rallying on the view that maybe the Fed is going to pivot soon," he said. "I just don't think the Fed wants to encourage an equity market rally at the moment, because that would ease financial conditions."
ON THE ASX:
* The benchmark S&P/ASX200 index on Wednesday closed up 15.9 points, or 0.23 per cent, at 6,823.2.
* The All Ordinaries climbed 12.9 points, or 0.18 per cent, to 7,038.1.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 69.69 US cents, from 69.69 US cents at Tuesday's close
* 94.98 Japanese yen, from 95.24 yen
* 68.34 Euro cents, from 68.16 cents
* 57.54 British pence, from 57.82 pence
* 111.34 NZ cents, from 111.31 cents.
34°C