UBS cuts Shell to “neutral,” warns stock ‘no longer cheap’ after strong rally
Updates with analyst comments
Investing.com-- Australian consumer price index inflation grew more than expected in October amid higher housing and food prices, with the print now raising more questions over the Reserve Bank’s plans to cut interest rates further.
Headline CPI inflation rose 3.8% year-on-year in October, data from the Australian Bureau of Statistics showed on Wednesday. The print beat expectations that it would remain steady at 3.6%.
The headline print was at its highest level since June 2024.
Underlying inflation also rose during the month. Trimmed mean inflation grew 3.3% in October, up from 3.2% in September.
October’s reading was driven chiefly by surging electricity costs, which jumped 37.1% during the month. This came as state government electricity rebates, which had helped substantially lower electricity prices last year, ended in recent months.
Wednesday’s data was the first complete monthly CPI reading from the ABS, as part of changes aimed at releasing more detailed inflation metrics on a monthly basis, rather than quarterly.
The rise in underlying inflation, which remained well above the RBA’s 2% to 3% annual target, raised questions about just how much headroom the central bank has to cut interest rates further.
Wednesday’s reading is also the fourth month in a row that inflation has overshot estimates, with investors seen rapidly dialing down expectations for a December rate cut by the RBA.
"With inflationary pressures continuing to strengthen at the start of the quarter, there is little chance that rate cuts will be on the RBA’s agenda anytime soon," analysts at Capital Economics wrote in a note.
They also noted that sticky inflation pointed to growing risks that the RBA will hold off on cutting rates further until as late as the second half of 2026, and that the RBA’s easing cycle may well be over.
The Australian dollar firmed 0.4% after the reading, while Australian stocks trimmed some early gains.