Reserve Bank of Australia Expected to Hike Rates as Inflation Hits 4.3%

The Reserve Bank of Australia is expected to raise interest rates on November 3, which would mark the fifth increase this year. Market pricing for a hike rose from 60% to 80% following data from the Australian Bureau of Statistics showing headline annual inflation climbed to 4.3% in September. Core inflation rose by 1% in the September quarter, exceeding the central bank's forecast of 0.8%.

Governor Michele Bullock told a Senate estimates hearing that inflation is likely to exceed August forecasts due to a tight labor market and surging global energy prices linked to the Middle East conflict. Deputy Governor Andrew Hauser characterized the current inflation numbers as too high, though he noted they were broadly in line with some market expectations.

Political disagreement has emerged over the drivers of the surge. Treasurer Jim Chalmers attributed the rise to global oil prices and international conflict. Conversely, Shadow Treasurer Tim Wilson blamed government spending and budget deficits for the inflationary pressure. Critics also pointed to a federal decision to delay the impact of the Iran war on energy prices for three months as wasteful spending that increased the deficit.

The inflationary trend is mirrored in the United States, where data provider Truflation expects the personal consumption expenditures price index to accelerate to 3.6% annually. U.S. inflation has been impacted by aggressive trade tariffs and higher crude oil prices following a joint U.S.-Israeli assault on Iran in February.