Hot Inflation Leads to Australian Dollar Rise
The Australian dollar (AUD) edged up to around $0.660 and briefly touched a three-week high on Wednesday. The reason is simple: the market is now almost certain that the Reserve Bank of Australia (RBA) will cut interest rates next week. Why? Because inflation is still hot. The latest data shows that Australia's annual inflation rate in September 2025 rose to 3.5%, higher than market expectations and up from 3% the previous month. The price surge came primarily from housing and transportation costs, including increasingly expensive energy and fuel. This kept inflation above the RBA's official 2%–3% target.
What surprised the market even more: core inflation also rose. The RBA's benchmark—the trimmed mean—rose to around 3% annually, and even jumped 1% compared to the previous quarter. This is the first time the core rate has risen since late 2022, signaling that price pressures are not just temporary. This means that prices for services and everyday living costs in Australia remain stubbornly high, even though the labor market is starting to cool somewhat. The RBA had previously expressed concern that services and rental inflation might not fall as quickly as expected.
The result: investors backed away from their bets that the RBA would cut rates quickly. Now the market is almost entirely expecting the RBA to hold rates at 3.6% at its November 4 meeting, not cut them again. The overarching tone has changed to: inflation is still stubborn, so policy easing can't be rushed. That's why the AUD looks strong — because the market is reading signals that Australian interest rates are likely to remain higher for longer. (az)
Source: Newsmaker.id
