Australia's central bank set to weigh if rate hikes are enough to curb inflation

In the third quarter, Australian underlying inflation surged more than anticipated, reinforcing the case for the Reserve Bank of Australia (RBA) to raise interest rates at their upcoming meeting. The consumer price index increased by 1.3% in the September quarter, aligning with forecasts but showing a faster pace compared to the 0.6% rise in the prior quarter, according to data released by the Australian Bureau of Statistics on Wednesday. Real-time updates on significant economic indicators can be accessed through InvestingPro Annual.

Trimmed mean inflation, a closely monitored metric, expanded by 1.0% quarter-over-quarter, matching expectations yet surpassing the RBA's anticipated 0.8%. The annual trimmed mean inflation rate also quickened to 3.7%, exceeding forecasts of 3.6% and the previous figure of 3.6%. These figures contribute to mounting pressure on the RBA, which increased its cash rate by 25 basis points to 4.60% in September due to ongoing inflationary pressures and rising oil prices.

The central bank is set to convene on November 2-3 to determine if additional policy tightening is necessary.

Deputy Governor Andrew Hauser recently cautioned that the inflation outlook has deteriorated significantly, underscoring the difficulty of curbing prices without adversely impacting economic growth. The headline annual inflation rate also rose to 4.3% in September from 4.0% in August, partly attributable to housing and transport costs, including higher fuel prices. With underlying inflation persisting well above the RBA's 2%-3% target, the data may bolster expectations of another rate hike.