Odds of Australian Rate Hike Reach 51% After Hauser Warns of Worsening Inflation Outlook
Key Facts
The probability of an Australian interest rate increase in November reached 51%, according to Bloomberg data cited by the Australian Broadcasting Corporation, as Reserve Bank of Australia Deputy Governor Andrew Hauser warned of a deteriorating inflation outlook. Speaking during a conversation and question-and-answer session at a Citi conference in Sydney on 21 October 2026, Hauser said the outlook had become "materially worse" than the bank's August projections. The odds of a hike had fallen below 20% the previous week following the release of unemployment data, according to the broadcaster. Australia's unemployment rate stood at 4.7% in September. UBS expects a rate increase in November, while its chief economist George Tharenou described Hauser's remarks as hawkish, according to the same coverage.
In a transcript of the discussion published by the RBA, Hauser said a growing share of businesses now regard inflation between 3% and 3.5% as "the new normal". He based that assessment on the bank's business liaison and a survey conducted with Macquarie University. He also noted that a domestic data centre boom was driving strong business investment. This coincides with stronger-than-expected external demand, particularly in Asia, according to Hauser. He said the quarterly underlying inflation reading was likely to exceed the assumptions in the August report. That assessment was conditional on there being no very large downside surprise in the final month of the quarter.
Australian Bureau of Statistics data showed annual headline inflation accelerated to 4.0% in August from 3.5% in July. Annual trimmed mean inflation, meanwhile, remained at 3.6% in both months. Automotive fuel prices rose 14.8% month on month in August. The bureau attributed the increase to higher global oil prices and the expiry of the remaining federal fuel excise relief. Housing group prices also rose 5.7% year on year, with new dwellings, electricity and rents the main contributors to the increase.
The Monetary Policy Board unanimously raised interest rates by 25 basis points to 4.60% at its September meeting, according to minutes published by the RBA. The decision statement said AI-related demand was driving rapid increases in technology goods prices globally. The bank also cited higher energy prices and persistent domestic capacity pressures as part of the backdrop to its inflation assessment. Explaining monetary policy transmission, Hauser said some of the bank's models attribute up to two-thirds of the impact of interest rates to the exchange rate channel, according to the Australian Broadcasting Corporation. That channel includes the cost of businesses' imports, he explained.
In currency markets, the Australian dollar closed at 0.70268 U.S. dollars on 21 October, according to EL7.AI platform data. That compared with a close of 0.70028 U.S. dollars the previous day. The Australian Bureau of Statistics is scheduled to publish the September consumer price index on 28 October 2026. The RBA will announce its next interest rate decision on 3 November 2026. The decision coincides with the publication of the bank's Statement on Monetary Policy and new economic forecasts.