The Reserve Bank of Australia (RBA) is widely expected to raise interest rates for the fifth time in 2026 on Melbourne Cup day, but upcoming inflation data could change that plan. The September quarter inflation figures, due on Wednesday, will be crucial in determining the RBA's next move. A softer-than-expected print could prompt the central bank to hold off on a rate hike.
Markets have increased their bets for a November rate hike following comments from RBA deputy governor Andrew Hauser earlier in October. Hauser warned that the board faces 'hard choices' to bring inflation down amid slowing growth and a weakening jobs market. He also noted that inflation expectations are rising, which could complicate efforts to control inflation in the future.
Higher oil prices from the Middle East conflict are no longer seen as temporary, raising concerns that businesses may pass on higher input costs to consumers. Commonwealth Bank economists predict the quarterly trimmed mean inflation will increase by one percent, up from 0.8 percent in the June quarter. This aligns with the RBA's August forecast but could signal broader inflationary pressures.
The RBA will closely watch market services inflation, which reflects price growth in consumer-facing items like restaurant meals and gym memberships. CBA expects this to accelerate from one percent to 1.2 percent, indicating potential domestic capacity pressures. Several RBA officials, including governor Michele Bullock and chief economist Sarah Hunter, are scheduled to appear before a Senate estimates hearing when the inflation data is released.