Business · Economy · 2 hrs ago
RBA deputy warns inflation outlook is materially worse
Reserve Bank of Australia deputy governor Andrew Hauser says the inflation outlook is materially worse than the bank expected in August.
Australia’s inflation was 4% in August, above the RBA’s target of 2% to 3% on average over time.
Hauser said some businesses and people may be starting to see higher inflation as normal, which could make it harder to bring prices under control.
The RBA faces a choice between tackling inflation and risking weaker economic activity and jobs, as high interest rates and fuel prices weigh on the economy.
Hauser also pointed to higher oil prices, strong growth among trading partners in Asia and investment in data centres as pressures on the outlook.
Markets see a chance of another rate rise in November, though the decision has not been made.
The RBA will publish new economic forecasts and announce its next rate decision on November 3.
RBA deputy governor Andrew Hauser says Australia’s inflation outlook is materially worse than the central bank forecast.
His warning has raised the prospect of another interest rate hike at the RBA’s next decision on November 3.
Inflation is 4 per cent, above the RBA’s target of 2 to 3 per cent on average over time.
Hauser says businesses are increasingly treating inflation of about 3 to 3.5 per cent as the new normal.
The RBA faces a trade-off between curbing inflation and protecting economic activity and the labour market.
- Who
- Andrew Hauser, deputy governor of the Reserve Bank of Australia.
- What
- He warned that the inflation outlook is materially worse than forecast, raising the prospect of another rate hike.
- When
- He spoke on Wednesday, October 21, ahead of the RBA’s November 3 rate decision.
- Where
- At an investment conference in Sydney.
- Why
- He said inflation was high and there were signs that some people and businesses doubted it would return to target.
This story does not have two clearly opposing sides.
Australia’s unemployment rate reached 4.7 per cent, a five-year high.
Hauser warned at a Sydney investment conference that the inflation outlook was materially worse than forecast.
The RBA monetary policy board is due to begin its two-day meeting.
The RBA is due to announce its next rate decision and release its quarterly forecasts.
- Inflation
- 4 per cent, according to the August consumer price index
- RBA inflation target
- 2 to 3 per cent on average over time
- Unemployment
- 4.7 per cent in September, a five-year high
- Market pricing
- 42 per cent chance of a November rate hike, according to LSEG data
- Next rate decision
- November 3
3 sources
What people are saying
We can't allow expectations to shift away from target.
Those are hard choices. They’re not where we’d like to be ideally as the central bank, but I think that’s the that’s what we’re facing into as we as we meet the week after next.
It's a continuous challenge to explain this.
Clearly, we need a period of below-trend growth to bring inflation down, and we’re seeing that happening.