Australia Inflation Surges to 3.2% Dashes Near-Term Rate Cut Hopes

Australia's inflation surged sharply in the September quarter, with the consumer price index rising 1.3% over the quarter and 3.2% annually, exceeding the Reserve Bank of Australia's (RBA) target band and market expectations. Core inflation climbed to 3%, marking the first rise in nearly three years and signaling persistent inflationary pressures driven by rising electricity prices, housing rents, and services costs following the roll-off of energy subsidies. These inflation figures have severely reduced expectations for an imminent RBA interest rate cut, with markets now pricing in a very low probability of cuts at the upcoming Melbourne Cup meeting and into December. The Australian dollar rose to a four-week high, and government bond yields increased, reflecting investor concerns about a more hawkish monetary policy stance. Economists warn that while inflation remains above the RBA's target, the economy exhibits resilience, though household budgets may tighten ahead of the holiday shopping season. Overall, the data presents a challenging scenario for policymakers balancing inflation control and economic growth.