Australia inflation jumps to 4.3% ahead of Reserve Bank meeting

Australia's inflation rate rose more than expected in September, strengthening expectations that the Reserve Bank of Australia could raise interest rates at its meeting next week. The consumer price index increased by 0.8% in the month, up from 0.4% in August, while annual inflation accelerated to 4.3% from 4.0%, according to the Australian Bureau of Statistics. The data arrived just days before the central bank begins its board meeting on Monday and announces its decision on Tuesday afternoon.

The figures showed that housing remained the largest contributor to annual inflation, rising 5.2% over the year. The ABS also said the trimmed mean, a closely watched measure of underlying inflation, increased to 3.6% in September. That was slightly above the revised August reading of 3.5%, suggesting price pressures remain persistent even after earlier signs of easing.

The release immediately shifted market expectations for the central bank's next move. Before the data, market pricing had already put the chance of a November rate hike at more than 60%. The latest inflation print is likely to reinforce pressure on policymakers as they prepare to update their economic forecasts, including their outlook for inflation.

The figures matter because the Reserve Bank has been trying to balance inflation control against signs of slower economic momentum. A higher-than-expected reading can make it harder for the bank to argue that price growth is moving back toward its target range. It also raises the stakes for households and businesses that have already faced a prolonged period of higher borrowing costs.

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The warning signs were building before the data release. Last week, Reserve Bank deputy governor Andrew Hauser said the inflation outlook looked "materially worse" than the bank had forecast. That assessment now appears more significant in light of the September numbers, which suggest the central bank may need to consider whether current policy settings are restrictive enough.

What remains unclear is whether the board will decide to raise rates or hold them steady when it meets next week. The bank's updated forecasts, due alongside the decision, will be closely watched for clues about how officials interpret the latest inflation trend. Investors will also be looking for any signal on whether the September reading marks a temporary setback or the start of a more persistent rise in prices.

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