Australia Inflation Defies Rate Hikes, RBA Warns of Further Tightening

Australia's inflation remains stubbornly high, defying a string of rate hikes by the Reserve Bank of Australia (RBA). The latest data from the Australian Bureau of Statistics shows that the monthly consumer price index rose 0.4% in August, with fuel costs jumping 14.8% due to higher oil prices and the unwinding of government tax relief.

The annual pace of inflation pushed higher to 4.0%, well above the RBA's target band of 2% to 3%. The trimmed mean measure of core inflation increased by 0.2% in the month, leaving the annual pace steady at 3.6% for a third month.

Faraz Syed, a senior economist at Citi, argued that markets are underpricing the risk of another rate hike in November, with an implied probability of just 20%.

The RBA has already lifted interest rates to a 15-year high of 4.6%, and policymakers worry that inflation could become entrenched, having run above target for five straight years.