RBA's Blunt Messaging Raises Questions About Peak in Rates—Analysis

By James Glynn

SYDNEY--The Reserve Bank of Australia's recent strategy of blunt and frequent communication has left financial markets all but certain that it will raise interest rates for a fifth time this year at its policy meeting next week.

So pointed has the commentary been from the RBA's top ranks that the question of whether the bank might need to keep tightening in December or next year remains a live one.

Inflation data for September released Wednesday was highly alarming and prompted an immediate response from RBA Governor Michele Bullock, who said inflation "is simply too high."

The data showed consumer prices rose 4.3% on year, up from 4.0% in August. The more policy-sensitive trimmed mean measure of inflation rose 3.6% in September from a year earlier, slightly higher than August's 3.5%.

Financial markets have virtually fully priced in a further hike next month, keeping the official cash rate at its highest level in 15 years.

The RBA's top officials have been talking almost incessantly for months, and the message has been clear--inflation is going in the wrong direction and the bank needs to take action.

RBA Deputy Governor Andrew Hauser said in a recent television interview that consumers were justifiably "furious" that inflation had been allowed to remain high for so long, while adding last week that the inflation outlook was "materially worse."

The frankness of the RBA's communications is both refreshing and also alarming. Gone are the rehearsed lines that financial markets are used to hearing from the central bank.

The new approach has RBA officials speaking freely and often, and there's more to come.

Ahead of the RBA's December policy meeting, the market will hear from Hauser again, the bank's chief economist Sarah Hunter, and Governor Michele Bullock.

So there's scope for the RBA to build a case for a further interest-rate rise in either December or February, should policymakers feel the need.

Shane Oliver, chief economist at AMP, said a December interest-rate rise is "a high risk." Still, it isn't yet his base case.

"If the bank is going to hike again they may choose to wait until February, having just hiked for two meetings in a row in order to assess the impact," Oliver added.

Ivan Colhoun, a former senior economist at National Australia Bank, said the RBA will probably sit back and "survey the damage" in December.

However, more bad news from inflation in October could change things quickly, he added.

"The full impact of prior hikes are still coming through," Colhoun said.

If the RBA passes up the chance to raise interest rates further in December, it would still leave open the prospect of a hike in February, said Paul Bloxham, chief economist at HSBC Australia.

But by then, the economy may be slowing under the weight of higher interest rates, soaring fuel prices and gloom brought on by falling house prices, he added.

That would sideline the RBA for good in this cycle, Bloxham added.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

October 29, 2026 01:16 ET (05:16 GMT)