Hot Inflation Data Fuels Expectations of an RBA Rate Hike as Housing Costs Surge

Economists say Australia’s hotter‑than‑expected inflation result has sharply increased the likelihood that the Reserve Bank of Australia will lift interest rates at its meeting next week, as price pressures continue to run well above the central bank’s target.

The RBA aims to keep inflation between 2 and 3 per cent, but the latest figures show price growth still pushing far beyond that range a development analysts say will weigh heavily on the bank’s decision‑making.

Capital Economics’ Abhijit Surya described the inflation jump as making it “all but certain” the RBA will raise the cash rate. He pointed to rapidly rising “shelter inflation” the cost of housing as a key driver. Rental inflation climbed from 3.8 to 4 per cent, marking its first increase in seven quarters, while the cost of new dwellings surged from 0.9 to 2.5 per cent, the highest in a year.

“With the housing market still running hot, shelter inflation is likely to rise further in the months ahead,” Surya warned.

BDO chief economist Anders Magnusson echoed the sentiment, saying the central bank now appears “primed” to tighten monetary policy again as it battles persistent price pressures.

With inflation refusing to cool and housing costs accelerating, markets are bracing for the RBA to act a move that would push up mortgage repayments and borrowing costs across the economy.