Australia’s September-quarter inflation figures are shaping as the key test for whether the Reserve Bank of Australia delivers a fifth interest rate rise this year when it meets next week.
Economists expect trimmed mean inflation, the RBA’s preferred measure of underlying price pressures, to rise by around 1.0% over the September quarter.
That would be above the central bank’s previous forecast of 0.8% and leave annual underlying inflation around 3.6%, still well above the RBA’s 2%-3% target range.
Headline inflation is also expected to remain elevated after fuel and energy costs surged during the quarter.
November rate decision hangs in balance
The RBA has already lifted the cash rate four times this year to 4.60%, its highest level in around 15 years.
ANZ and Westpac expect another 25-basis-point increase in November, while Commonwealth Bank and NAB have recently favoured holding rates steady.
The September inflation result could break that deadlock.
A trimmed mean result of 1.0% or higher would strengthen the case for another hike, while a softer reading could give the RBA more time to assess the impact of previous tightening.
The inflation figures arrive as unemployment has risen to 4.7%, house prices are falling and consumer confidence remains historically weak.
That leaves policymakers balancing two competing risks: allowing inflation to remain too high for too long or tightening monetary policy enough to produce a deeper economic slowdown.
