Australian Rate Hike to 4.85% Expected After Annual Inflation Rises to 4.3%
Key Facts
Commonwealth Bank forecast that the Reserve Bank of Australia will raise its official cash rate by 0.25 percentage points to 4.85% at its November meeting, while ANZ said a hike was more likely than not. The forecasts followed an increase in the annual consumer price index to 4.3% in the 12 months to September, from 4.0% in the period to August, according to the Australian Bureau of Statistics. The cash rate target has remained at 4.60% since 30 September, according to the central bank. If approved, the increase would be the fifth in 2026, according to Commonwealth Bank. ANZ said the expected level would be the highest since 2008 and could weigh on consumer spending.
Underlying inflation, measured by the trimmed mean, rose to 3.6% year on year to September, compared with August’s reading, revised down to 3.5%, according to the Bureau of Statistics. ANZ said it expects this measure in the third quarter to exceed the central bank’s forecasts, citing its view that a November increase is “more likely than not.” The headline measure also accelerated, rising 0.8% in September in original terms and 0.6% after seasonal adjustment. This puts monthly and annual price data at the center of the debate over the bank’s next move ahead of its scheduled November meeting. The cash rate target was raised by 25 basis points to 4.60% on 29 September, according to the central bank’s statement.
Commonwealth Bank said the inflation risks flagged by the central bank include higher energy costs, a global investment boom in artificial intelligence and constraints on domestic production capacity. The bank quoted its chief economist for Australia as saying, “The key question is whether the four increases this year are enough.” The assessment reflects the possibility that prices will continue to rise despite previous increases, while ANZ believes the expected interest-rate level could weigh on household spending. In its September statement, the central bank said inflation remained high and that some of the upside risks it had flagged in August “were beginning to materialise.” In August, the bank had forecast underlying inflation would remain above 3% until mid-2027, before falling to 2.5% by early 2028.
The producer price index for the September reference period is scheduled for release on 30 October at 11:30 a.m. Australian Eastern Daylight Time, according to the Bureau of Statistics calendar. It comes ahead of the central bank’s November meeting, when it will announce its decision and monetary policy statement. Minutes of the September meeting also said board members would continue to monitor incoming data, while keeping open the option of raising the cash rate target “if needed.” After the November meeting, the consumer price index for the October reference period is due on 25 November. Australian labour market data for October will be released on 19 November, according to the Bureau of Statistics schedule.