Australia’s inflation hit a 32-year high in the last quarter on rising construction and gas costs, a shock result that increased pressure on the country’s central bank to start raising interest rates more aggressively. Data from the Australian Bureau of Statistics (ABS) on Wednesday showed that the consumer price index (CPI) rose 1.8% in the September quarter, beating market forecasts of 1.6%. The annual rate shot up to 7.3% versus 6.1%, the highest level since 1990 and nearly three times faster than wage growth.

A closely watched measure of core inflation, the trimmed mean, also rose by 1.8% for the year quarter. Increase in the annual rate to 6.1% and thus again well above the forecast of 5.6%. That would be bad news for the Reserve Bank of Australia (RBA), which had expected core inflation to peak at 6.0% in the December quarter, on broader inflation of 7.75%. Instead, analysts warned that both the core and core metrics would continue to rise this quarter as the new monthly ABS CPI is set to pick up in September.

The AUD/USD pair has risen to 0.6400 as the Australian Bureau of Statistics released its main consumer price index for the third quarter of 2022. This could force the RBA to announce a higher rate hike in the next quarter monetary policy. It is worth noting that the RBA raised the official cash rate (OCR) by 25 basis points (bps) to 2.6% at its October policy meeting. RBA Governor Philip Lowe slowed the pace of rate hikes in October as the central bank previously expected a 50-basis point rate hike. Now, a larger than forecast rate hike will force the RBA back into a 50bp hike period