Odds of Australian Rate Hike Near 50% After Hauser's Inflation Warning
Key Facts
Markets priced in a nearly 50% chance of an Australian interest rate hike in November after Reserve Bank of Australia Deputy Governor Andrew Hauser warned that the inflation outlook had deteriorated since the bank's August forecasts. According to an update published by Reuters on October 21, 2026, the probability rose from 30% at the start of the week as expectations for the next decision shifted. The pricing reported by the agency puts the interest rate at 4.85% if an increase is approved at the November meeting. In remarks published on the bank's website, Hauser said "the inflation outlook looks materially worse," pointing to a change in the conditions underpinning the previous forecasts. The remarks also affected financial institutions' forecasts, with Reuters reporting that they prompted Goldman Sachs to predict another rate increase in November.
Outlining the factors adding to price pressures, Hauser said oil prices were about a third higher than the levels the bank had assumed when preparing its August forecasts. He described prices as "about a third higher than we assumed," linking the comparison to the assumptions used in that forecasting round. He also pointed to higher prices for artificial intelligence and technology goods feeding into the consumer price index, adding them to the sources of pressure discussed in his remarks. His warnings came after Australian Bureau of Statistics data showed annual headline inflation rose to 4.0% in August from 3.5% in July. Trimmed mean inflation, a measure of underlying inflation, stood at 3.6% year on year in August, according to the bureau, alongside the acceleration in headline consumer prices.
The Reserve Bank of Australia had already raised its cash rate target by 25 basis points to 4.60% at its previous meeting in September, according to the decision statement. Minutes of that meeting showed board members unanimously agreed to raise the rate target. In its September statement, the bank affirmed its readiness to take further steps, including "raising the cash rate target again if needed." Its August forecasts had indicated that trimmed mean inflation would remain above 3% until mid-2027, a projection that preceded Hauser's warning of a deteriorating outlook. The same forecasts showed underlying inflation subsequently falling to 2.5% by early 2028, placing the easing of price pressures on a horizon extending beyond next year.
Meanwhile, a preliminary reading of Australian private-sector activity showed the composite purchasing managers' index fell to 47.7 points in October from 51.3 points in September, according to a Dow Jones report on the survey. The slowdown in activity was accompanied by higher input-cost and selling-price inflation, according to the same survey, as price pressures coincided with weaker activity during the month. S&P Global's Jingyi Pan attributed the decline in activity to "higher prices and rising interest rates." In the labour market, Australian Bureau of Statistics data showed seasonally adjusted employment fell by 39,300 people in September 2026. The decline represented a monthly drop of 0.3%, bringing total seasonally adjusted employment to 14,782,700 people, against an economic backdrop of falling employment and slowing business activity.
The next milestone ahead of the rate meeting is the Australian Bureau of Statistics' release of September consumer price index data, scheduled for October 28, 2026. The bureau set the release for 11:30 a.m. Australian Eastern Daylight Time, bringing a fresh inflation reading before the Monetary Policy Board meets in November. According to the Reserve Bank of Australia's official calendar, the board's next meeting will take place on November 2–3, 2026. The monetary policy decision will be announced on the second day of the meeting, following the inflation data scheduled for the preceding week. The bank will publish its quarterly Statement on Monetary Policy alongside the meeting's outcome, making November's meeting an occasion for both the interest rate announcement and the bank's regular statement.