Australian economists anticipate possible November rate hike as inflation data looms
Economists expect trimmed-mean inflation to exceed the Reserve Bank of Australia's forecasts, raising the likelihood of a cash-rate increase in November.
Australia’s next inflation reading, due on Wednesday, is projected to be higher than the Reserve Bank of Australia's (RBA) expectations, prompting market analysts to signal a stronger chance of a November cash-rate rise. Betashares chief economist David Bassanese said the market anticipates a 1.0 per cent quarterly gain in trimmed-mean inflation, which would meet RBA deputy governor Andrew Hauser’s definition of a “materially worse” outcome compared with the bank’s August forecast of 0.8 per cent. He added that this could solidify the case for a November rate hike, even though the RBA already implemented a pre-emptive increase in September.
The RBA has lifted the cash rate four times this year, moving it from 3.60 per cent to 4.60 per cent. A further increase in November would mark a fifth hike within seven meetings. Market pricing for a rate rise has risen from 27 per cent last week to over 60 per cent ahead of the upcoming policy decision.
Deputy governor Hauser, speaking at a Citi Investment Conference, acknowledged that inflation outlook appears “materially worse” than projected in August and that the bank faces “difficult choices” balancing inflation risks against economic growth. RBA chief economist Sarah Hunter, on a television interview, reiterated that the bank must act to bring inflation back to target, noting that higher rates, while painful for households, are an effective tool.
Treasurer Jim Chalmers defended Australia’s position, noting that the country’s debt levels and interest-payment burdens are lower than many peers and that global developments, such as the conflict in the Middle East, are contributing to price pressures. He warned that these external factors add to domestic inflation challenges for Australian families.
Economists such as Warren Hogan of EQ Economics described the RBA’s communication strategy as “relentless” in emphasizing the need for higher rates, and predicted a “slam-dunk” likelihood of a 25-basis-point hike on the upcoming policy meeting.