Inflation rises, dampening hopes of November rate cut

Underlying inflation has risen to three per cent over the year to September, damaging mortgage holders' hopes of an interest rate cut.

Housing, recreation and culture, alcohol and tobacco, and communication had the biggest price increases over the most recent quarter, according to the Australian Bureau of Statistics.

Underlying or trimmed-mean inflation is the RBA's preferred measure because it ignores volatile items such as power prices.

The previous reading in June was 2.7 per cent.

Headline inflation, which covers a broader swathe of the economy, jumped to 3.2 per cent over the year to September, largely because of changes to government energy bill rebates in some states.

The Reserve Bank's target band for inflation is between two and three per cent.

Analysts were widely expecting