Australia's Inflation Outlook Worse Than Expected, RBA Deputy Says

what happened

Reserve Bank of Australia deputy governor Andrew Hauser said on Wednesday that the country's inflation outlook is "materially worse" and that third-quarter inflation data are likely to confirm this. He said inflation has been running a little above expectations despite some easing in the labor market. According to Dow Jones Newswires, the remarks came ahead of the RBA's early-November policy meeting, where bond traders had already become less convinced of another rate hike.

Hauser said the central bank's business contacts name cost pressures as their top concern, and many firms are passing those costs on to prices. A growing number of companies see inflation at 3.0% to 3.5% as the new normal. Key inflation figures due next week are expected to show price pressures stronger than the RBA had forecast, reflecting higher fuel costs and an artificial intelligence investment boom.

why it matters

The RBA has raised rates four times this year, while inflation remains near 4.0%, well above the 2.5% target. That mix strengthens expectations of further tightening, which matters for the Australian dollar, government bonds and the ASX 200. Unemployment is rising and demand is cooling, so the central bank's balancing act remains difficult.

market impact

AUD and Australian bonds: stronger inflation raises the odds of another RBA rate hike

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