Inflation has been rising over the past two months and, although this is partly due to less favorable base effects, monthly rates in August and September were close to 0.6% month-on-month. This is much higher than is consistent with a return to the Reserve Bank of Australia’s target inflation range of 2-3%.
Given the RBA’s latest indication of low tolerance for inflation to remain above target coupled with still-tight labor markets, it appears new Governor Michele Bullock has few credible options but to readjust rates again at the next meeting. An increase of 25 basis points will take the interest rate to 4.35%.
