Hotter than expected inflation will likely force the Reserve Bank of Australia (RBA) to consider stepping up the pace of hikes from 25 basis points in October back to 50 basis points in November.
The Consumer Price Index (CPI) rose 1.8 per cent in the September 2022 quarter lifting the annual figure to 7.3 per cent, according to the latest data from the Australian Bureau of Statistics.
The figures - both quarterly and annual, exceeded the RBA's, economists' and market expectations of 1.6 per cent and around 7 per cent respectively, boosting the chance of more and bigger rate hikes in the months ahead.
The RBA's preferred inflation gauge, annual trimmed mean inflation, hit the highest level since the series commenced in 2003, increasing to 6.1 per cent, up from 4.9 per cent in the June quarter. The figure is higher than the upper bound of the RBA target range of 2-3% and the 6 percent year-end forecast in the RBA's rate planing.
In October the RBA unexpectedly broke with the peers around the world by slowing the pace of rate hikes – lifting the cash rate by 0.25 percentage point, half of what markets had expected in terms of the consistent serious efforts to curb red-hot inflation and inflation expectations.
Meanwhile, the Fed continues to deliver outsized benchmark interest rises, which is also mounting pressure on the RBA to catch up or let the Australian dollar devalue and capital flight accelerate.
