Australia's Inflation Rate Surges Despite Record-High Interest Rates

Australia's inflation rate accelerated in August, despite the Reserve Bank of Australia (RBA) hiking interest rates to a 15-year high of 4.6% on Tuesday.

The Australian Bureau of Statistics reported that its monthly consumer price index rose 0.4% in August from July, driven by fuel costs surging 14.8% due to higher oil prices and the unwinding of government tax relief.

The annual pace of inflation still 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, said markets were underpricing the risk of another rate hike in November, arguing the implied probability should be closer to 50% given the quarterly trimmed mean measure is still expected to land at 1%, too hot for the RBA.