RBA deputy warns on rising inflation outlook
- Reserve Bank of Australia Deputy Governor Andrew Hauser warned that Australia's inflation outlook is materially worse than previously forecast.
- Market pricing for a November interest rate hike jumped from under 20% to 42% following the comments.
- The central bank aims to prevent high inflation expectations from becoming permanently entrenched across Australian businesses and households.
Reserve Bank of Australia Deputy Governor Andrew Hauser warned that Australia's inflation outlook has worsened, raising the possibility of an interest rate increase in November.
The official statement contrasts with previous forecasts, as headline inflation currently sits at 4.0%, remaining well above the central bank's target band of 2% to 3%.
"We are beginning to see some signs that some people in the community are not sure if we're going to bring inflation back into target at all, or certainly not for an extended period," said Hauser.
Financial markets rapidly adjusted to the announcement, with trading data showing the probability of a rate increase next month rising to 42%.
The central bank stated that short-term economic tightening remains necessary to prevent long-term inflationary risks despite the national unemployment rate rising to 4.7%.
The central bank has maintained a tight monetary policy stance throughout the year to combat persistent price pressures across supply chains and service sectors.
The board will officially publish its updated economic projections and deliver its next cash rate decision on Nov. 3.
