Australian shares trim gains as inflation stays high and RBA hike bets grow

what happened

Australian shares erased most of their early gains on Wednesday after September-quarter inflation came in hotter than expected, lifting bets on another rate increase this year. According to Reuters, the S&P/ASX 200 was up 0.4% at 8,883.20 by 0106 GMT, after climbing about 1% before the data was released.

The annual pace of the trimmed mean measure of core inflation reached 3.6%, well above the central bank's 2% to 3% target range. RBA Governor Michele Bullock said policymakers will weigh next week whether four rate hikes this year are enough, and warned that domestic price pressures remain elevated. Swaps now imply an 86% chance of a quarter-point hike to 4.85%, up from 69% before the data.

In New Zealand, the central bank surprised markets by keeping its cash rate at 2.75%, but said tighter policy is likely to be needed depending on the outlook. The S&P/NZX 50 edged up 0.1%. Heavyweight miners rose 1.6% as copper gained on stronger demand in China, with Rio Tinto and BHP up 0.4% and 0.7%. Energy stocks slid 1.2% on lower oil prices, and Woodside Energy and Santos each fell more than 1.4%.

why it matters

The shift in rate expectations matters for markets: a tighter RBA stance typically supports the Australian dollar but weighs on rate-sensitive sectors. Higher copper on Chinese demand helps the resources sector, while weaker oil hurts energy shares.

market impact

Australian dollar and banks: higher RBA rate bets support the currency; energy shares under pressure

• ▲Australian dollar pressure up — rising expectations of an RBA rate hike
• ▼Australian energy stocks pressure down — oil prices fell

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