Australian inflation is expected to remain stubbornly high when September-quarter Consumer Price Index figures are released on Wednesday, keeping the possibility of another Reserve Bank interest rate increase firmly alive.
Economists expect headline inflation to rise around 1.3% over the quarter, leaving the annual rate close to 3.9%.
Underlying inflation is expected to prove equally persistent.
Commonwealth Bank economists forecast trimmed mean inflation, the measure most closely watched by the RBA, to increase 1.0% over the quarter and remain at around 3.6% annually.
That would leave underlying inflation well above the central bank’s 2%-3% target range despite four interest rate increases already delivered this year.
November decision looms
The CPI release comes less than a week before the RBA’s next monetary policy meeting on November 3.
The cash rate currently stands at 4.60%, its highest level in around 15 years.
Deputy governor Andrew Hauser recently described Australia’s inflation outlook as “materially worse” than the RBA anticipated in August, increasing expectations that another rate increase could be required.
Higher fuel prices are expected to feature prominently in the September data, while services inflation and business cost pressures remain persistent.
The RBA is also confronting a difficult economic backdrop.
Unemployment has risen to 4.7% and household spending is weakening, suggesting higher borrowing costs are already slowing the economy.
That leaves policymakers balancing deteriorating growth against inflation that remains too high.
A stronger-than-expected CPI print on Wednesday could therefore make a fifth rate increase this year increasingly difficult for the RBA to avoid.
