Data released by the Australian Bureau of Statistics on Wednesday showed that Australia’s preferred core consumer price index—the annual trimmed mean CPI—rose 3.7% in the latest quarter, outpacing the previous three-month period and surpassing economists’ forecast of 3.6%. On a quarterly basis, core inflation increased by 1%, in line with expectations.
The latest CPI data has led TD Securities to revise its interest rate outlook, now expecting the Reserve Bank of Australia (RBA) to raise rates next week.
In a report, TD analyst Prashant Newnaha noted that stronger-than-expected third-quarter inflation data reinforces the RBA’s decision last month to tighten monetary policy. Additionally, upward revisions to inflation forecasts further support another rate hike by the RBA in November.
CBA economist Belinda Allen also stated in a research note on Wednesday that she currently expects the RBA to raise interest rates to 4.85% in November.
Allen said: “Following a dovish press conference after the September rate hike, the RBA’s recent statements have shifted from earlier positions toward a more hawkish stance, focusing closely on upside inflation risks arising from both overseas and domestic capacity pressures.”
She added that inflation in the September quarter remains too high, describing the November rate increase as a “prudential tax hike” aimed at countering inflationary factors including the U.S.-Iran conflict. She emphasized that Australia continues to face a “ongoing tug-of-war between cyclical and structural factors,” noting weak productivity is constraining economic growth while global capital expenditure cycles are boosting demand.
Stephen Smith, partner at Deloitte Economics, said: “Today’s data confirms the concerns expressed by the central bank in recent weeks. Progress on lowering inflation has stalled. The RBA does not want inflation expectations to continue rising.”