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Market Analyst
Markets are pricing around a 62% chance that the Reserve Bank of Australia raises rates in November, and Australia's Q3 inflation data is the decider. Australia energy inflation is what keeps that hike door open, as the initial surge in energy prices is still working its way through supply chains and into wider prices. Headline CPI is expected to rise 1.3% for the quarter, with trimmed mean inflation forecast slightly above the Reserve Bank of Australia's own projection. At the same time, a softening labor market leaves the central bank balancing price pressure against a weaker economy.
Matt Simpson, StoneX Media Market Analyst, has spent 15 years analyzing and trading forex, indices, gold and oil, and is a certified financial technician. His coverage spans FX macro, technical analysis and market sentiment, tracking how central bank policy and inflation data feed through to currencies such as the Australian dollar.
Energy prices are feeding Australian inflation through the supply chain, and Reserve Bank of Australia Deputy Governor Andrew Hauser has warned that inflation might not be restricted to energy prices. Hauser's warning carries weight because energy cost increases do not reach consumer prices all at once. As a result, Australian inflation pressure can outlast any pause in energy prices themselves, keeping rate hike risk alive. "It will take time for the initial onslaught of energy prices to work its way through the supply chain," Simpson says.
The Reserve Bank of Australia is weighing inflation pressure against a softening economy as Q3 CPI approaches. According to Simpson, "with unemployment rising and business sentiment weakening, the RBA faces a difficult balancing act." A strong CPI print would confirm a November hike and could add conviction to another hike in 2027. Conversely, a softer print would weigh on the odds of that second move. Even then, the lag in energy pass-through means relief for Australian inflation is unlikely to arrive quickly.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Matt Simpson, StoneX Media Market Analyst
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