Inflation Jumps as Cash Rate Hike Takes Effect

The Reserve Bank's decision to raise the cash rate has been met with a second blow for home owners, as inflation jumped significantly in August. The Australian Bureau of Statistics reported a 4 per cent increase in consumer price index in August, up from 3.5 per cent in July. This rise is the latest in a series of increases that have left many Australians struggling to make ends meet.

The Reserve Bank governor Michele Bullock acknowledged the timing of the inflation announcement was unfortunate, coming just a day after the cash rate hike. However, she noted that interest rate changes do not happen overnight and that the bank is trying to gauge their impact on the economy in the long term.

Westpac is now predicting another rise in November, while the Commonwealth Bank of Australia and NAB are warning of a possible hold or another lift. The biggest drivers of inflation remain housing, which rose 5.7 per cent in the past 12 months, and transport, which increased by 5.6 per cent due to rising fuel costs.

The Reserve Bank has been clear that it will continue to raise interest rates as long as inflation remains above its target range of between 2 and 3 per cent.