RBA warns of hard choices as worsening inflation threatens fresh interest rate pain

RBA warns of hard choices as worsening inflation threatens fresh interest rate pain

Reserve Bank of Australia Deputy Governor Andrew Hauser says the inflation outlook is clearly darker than the central bank projected in August, forcing hard choices ahead. Headline inflation has already reached 4.0 percent, above the bank’s 2 to 3 percent target, while the trimmed mean measure sits at 3.6 percent. The cash rate has climbed from 3.60 to 4.60 percent after four increases in six meetings, and markets now price only a 27 percent chance of another hike on Melbourne Cup day. Hauser warns the bank must weigh weaker activity and job losses against the need to curb persistent price growth, especially after unemployment rose to 4.7 percent, its highest level since the pandemic. He says renters and low-income households are bearing the greatest pain, with up to 15 percent of renters in negative cash flow, compared with just 2 percent of mortgage holders. Rising fuel costs are adding pressure, with unleaded prices up about 39 percent since July and diesel up more than 45 percent. The central bank says it cannot block one-off price shocks but must stop them feeding into higher inflation expectations and a worse outcome for ordinary households.