RBA’s Hauser Signals Hawkish Tilt as Inflation Outlook Deteriorates

By / / Breaking News

This update was written automatically with AI from market data and news wire reports, and published without review by a person.

Key Takeaways

  • Inflation Outlook Worsens: RBA Deputy Governor Andrew Hauser warned that the inflation outlook is "materially worse" than projected in August, with the quarterly trimmed mean expected to exceed previous forecasts.
  • Capacity Constraints Intensify: Despite a slowing economy, Hauser noted that domestic capacity pressures are more intense than anticipated, complicating the bank's efforts to return inflation to the 2-3% target.
  • Labor Market Softening: The September labor report was "somewhat weaker than expected," with unemployment rising to 4.7%, though Hauser indicated this may not be enough to prevent further rate hikes.
  • November Meeting "Live": Markets are now pricing in a higher probability of a rate hike at the November 3 meeting (Melbourne Cup Day) following these hawkish remarks.

RBA Deputy Governor Flags Persistent Price Pressures

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser delivered a hawkish assessment of the Australian economy on Wednesday, suggesting that the battle against inflation is far from over. Speaking at the Citi (C) Australia and New Zealand Investment Conference in Sydney, Hauser stated that the inflation outlook has deteriorated significantly since the bank's August projections.

Hauser emphasized that while the RBA cannot "aim for current inflation," the persistent nature of high prices remains a critical concern for the board. He noted that businesses continue to cite cost pressures as their primary challenge, driven by a combination of high energy prices and supply-side shocks.

Labor Market Weakness vs. Capacity Constraints

The latest economic data presents a complex picture for policymakers. Hauser acknowledged that the September labor report showed signs of cooling, with the unemployment rate ticking up to 4.7% and employment falling by nearly 40,000. While this softening is typically a signal for central banks to pause, Hauser countered this by highlighting that capacity constraints in the broader economy remain more intense than the bank had originally modeled.

This "operative tension" between a softening labor market and stubborn domestic price pressures has left the RBA in a difficult position. Hauser remarked that the bank is still finalizing its forecasts ahead of the November 3 policy decision, but he warned that the RBA must respond to supply shocks to ensure inflation expectations remain anchored.

Market Reaction and the Road to November

Financial markets reacted swiftly to Hauser's comments, with the Australian Dollar (AUD/USD) climbing above the 0.7000 level to hit a two-week high. Investors interpreted the Deputy Governor's focus on "materially worse" inflation as a signal that a fifth interest rate hike for 2026 remains firmly on the table.

The current cash rate stands at 4.60% following a unanimous 25-basis-point increase on September 29. All eyes now turn to the September-quarter CPI data, scheduled for release on October 28, which Hauser suggested could run hotter than the RBA’s internal expectations. This data will likely serve as the final determinant for whether the RBA lifts rates again in November.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. We are not financial professionals. The authors and/or site operators may hold positions in the companies or assets mentioned. Always do your own research before making financial decisions.
Scroll to Top