Economists at Citi expect underlying inflation to rise about one per cent in the September quarter, above the Reserve Bank's August forecast. They say the data may matter less than comments from deputy governor Andrew Hauser, which suggested a rate rise is likely. Market pricing for a November increase rose above 50 per cent after his remarks. NAB still expects the cash rate to hold at 4.6 per cent, forecasting inflation to return to target as fuel cost pressures fade.
Reserve Bank of Australia deputy governor Andrew Hauser has warned of a worsening inflation outlook and left open the possibility of another interest rate hike in November. He said the bank faces hard choices, weighing higher inflation against a weaker labour market. Hauser said some businesses now regard inflation of around 3.5% as the new normal, which he called a central banker's nightmare. Third-quarter inflation data, due on October 28, is expected to play a decisive role in the decision. Markets are now pricing in a 51% chance of a November rate hike, up from below 20% last week.
Reserve Bank deputy governor Andrew Hauser says the board faces hard choices over whether to raise interest rates further. He spoke at a Citi bank conference in Sydney and said a November rate rise remains possible. Hauser said inflation expectations were becoming embedded as Middle East supply shocks continued, which he called a central banker's nightmare. Traders have raised their expectations of a November hike after softer jobs figures. Inflation data for the September quarter, due on October 28, will be pivotal to the decision.
AU Now app
Your suburb’s news, alerts and Shorts — in one app
Alerts, Shorts and your saved stories — free on Google Play.
Reserve Bank deputy governor Andrew Hauser says the inflation outlook is materially worse than the RBA had forecast. He warned that high inflation is becoming entrenched and that some businesses now see 3 to 3.5 per cent as the new normal. Inflation currently sits at 4 per cent, above the RBA's 2 to 3 per cent target. Market pricing gives a 51 per cent chance of a rate hike at the November 3 meeting. Mr Hauser said the labour market needed to soften, while the unemployment rate reached 4.7 per cent in September.
Reserve Bank assistant governor Christopher Kent has said rate rises affect more than mortgage holders. Speaking at a Commonwealth Bank conference, he said rate changes work through exchange rates, saving and investment, asset values and mortgage costs. He argued higher rates can lower petrol prices by supporting the dollar, which is priced in US dollars. Kent also said the labour market is slowing faster than expected, though monthly data is volatile. Tax changes to capital gains and negative gearing are also helping to ease the housing market, he said.
Minutes from the Reserve Bank's September meeting show a fifth rate hike in 2026 is still under consideration. The board raised the cash rate to 4.6% last month, citing the Middle East war, AI-driven demand and supply imbalances. Higher energy prices and rising AI component costs are adding pressure on inflation. Housing prices have fallen and new lending has dropped, while scheduled mortgage payments sit near their 2024 peak. The next rates decision is due on 3 November, with markets pricing in a 27% chance of a hike.
The Reserve Bank board has warned it will raise the cash rate further if needed to bring inflation back to target. Minutes from its September meeting show a focus on inflation rather than the weakening jobs market and falling house prices. The cash rate rose to 4.60 per cent, its highest level since 2011. Headline inflation reached 4.0 per cent in the latest data. Commonwealth Bank says the November meeting is live, meaning a further hike remains possible.
American-born economists Robert E Hall and Michael Woodford have won the Nobel memorial prize in economics. Their work on the micro-economic foundations of macro-economic stabilisation has provided a stable theoretical foundation for models now used by central banks and governments worldwide. Hall, 83, is a professor at Stanford University, while Woodford, 71, teaches at Columbia University in New York. The prize was announced in Stockholm by the Royal Swedish Academy of Sciences. Each laureate will receive around $900,000.
