Hauser warns inflation outlook worse, November rate hike in play

Hauser's comments are hawkish and could keep a rate hike on the table for 3 November. If markets increase pricing for a move, that would likely boost the Australian dollar and lift short-dated Australian yields. He acknowledged some slowing in labour and housing data, giving doves a point, but his focus on inflation expectations means the hurdle for holding rates steady is getting higher. The September-quarter CPI due on 28 October now appears pivotal: a stronger-than-expected reading would bolster the case for a fifth rate increase this year. Energy prices remain unpredictable, with the RBA previously pointing to the Middle East conflict and its impact on oil as an additional factor on top of domestic demand pressures.

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Hauser did not pre-announce a rate rise, but the inflation outlook being worse than forecast and a caution about expectations keep the November meeting very much in play.

Key points:

• RBA Deputy Governor Andrew Hauser noted that the inflation outlook is worse than the central bank's forecast, slightly above expectations.
• He stated that inflation has been elevated for an extended period and the RBA cannot let inflation expectations deviate from its target.
• Businesses report cost pressures as their primary challenge.
• He recognized some deceleration in labour and housing data and stated that monetary policy is having an effect.
• Staff are still finalising their projections, and Hauser said he does not know the Board's decision for certain.
• The cash rate stands at 4.60% after a 25-basis-point hike on 29 September; the next decision is on 3 November, with the Q3 CPI release on 28 October.

Speaking less than a fortnight before the RBA's 3 November meeting, Deputy Governor Andrew Hauser said the inflation outlook is worse than the central bank had projected, in hawkish comments.

At a fireside chat at Citi's Australia and New Zealand Investment Conference in Sydney on Wednesday, Hauser said inflation is trending a bit above expectations. He emphasized that inflation has been high for a long time and the RBA cannot permit inflation expectations to move away from its target, indicating policymakers increasingly worry about price pressures becoming entrenched.

Hauser noted that businesses cite cost pressures as their biggest issue. He recognized some deceleration in labour and housing data and said monetary policy is effective, but noted that the inflation outlook has still worsened.

Hauser was cautious not to anticipate the Board's decision. He stated that staff are still working on their forecasts and he is unsure what the Board will decide. The November meeting will include new RBA economic projections, revealing how much the inflation outlook has changed.

On 29 September, the RBA unanimously raised the cash rate by 25 basis points to 4.60%, its fourth increase of 2026. This year, Hauser has been one of the RBA's most vocal members on inflation, previously calling it the bank's single major problem and citing the Middle East conflict, an AI-driven global boom, and weak supply capacity as contributing factors.

The next significant event is the 28 October release of September-quarter CPI data, the final major data point before the Board's 2-3 November meeting. The decision will be announced at 2.30pm Sydney time on 3 November (03:30 GMT, 22:30 ET on 2 November). Given Hauser's indication that the outlook has deteriorated and expectations must remain anchored, an above-forecast CPI result would probably reinforce the argument for a fifth rate hike this year.