Australia’s consumer inflation accelerates to 3.8% in October, overshooting estimates

Australia’s Inflation Accelerates, Exceeding Analysts’ Estimates

Australia’s inflation accelerated in October, exceeding analysts’ estimates and rising at its fastest pace in seven months, data from Australian Bureau of Statistics showed Wednesday.

The consumer price index rose 3.8% in October, year on year, marking its fastest pace since April. This is the first time that the ABS has released the complete monthly consumer price index, transitioning from quarterly to monthly measurements.

The largest contributor to consumer inflation was the housing sector, driven by higher costs in electricity, rents, and new dwellings. Prices for food, non-alcoholic beverages, recreation, and culture also rose from a year earlier.

RBA Holds Interest Rates Steady

The Reserve Bank of Australia held interest rates at 3.6% earlier this month, cautious about further easing given higher inflation and a strong recovery in consumer demand. RBA Governor Michele Bullock indicated that the current interest rate cutting cycle could be close to an end.

The central bank expects headline inflation to peak at 3.7% in June next year before easing to the target range of 2% to 3% toward end-2027.

Economic Growth and Business Conditions

Improved business conditions and robust economic growth offer the Australian central bank room to keep rates steady to rein in inflation. Australia’s economy expanded more than expected in the second quarter, underpinned by domestic spending.

Australia’s benchmark stock index, S&P/ASX 200, was 0.73% higher on Wednesday. The Australian dollar depreciated 0.36% against the U.S. dollar, while the yield on the 10-year government gained 4 basis points.