The Reserve Bank of Australia (RBA) is unlikely to cut interest rates in November due to rising inflation that has exceeded its target range. RBA Governor Michele Bullock addressed economists on Monday, stating that a quarterly core inflation figure of 0.9 percent would be a significant deviation from the bank's forecasts. The trimmed mean inflation for the September quarter was reported at 1 percent, while the headline inflation rate was 1.3 percent.

Annual inflation surged to 3.2 percent in the September quarter, up from 2.1 percent in June. Although recent job data indicated a surprise increase in unemployment to 4.5 percent, the RBA has consistently viewed monthly employment fluctuations as volatile. The bank remains focused on quarterly inflation figures, which have raised concerns about a potential slowdown or reversal in the downward trend of inflation.

The RBA aims to maintain inflation within a 2-3 percent range, and the recent inflation spike complicates any plans for a rate cut. The end of electricity rebates was a major contributor to the inflation increase, but even without these rebates, electricity costs rose by 5.9 percent over the past year. Other areas of concern include a 1.9 percent increase in recreation and culture costs, driven by a 2.9 percent rise in holiday travel and accommodation.

The cost of dining out also increased by 3.3 percent, indicating that many households still have disposable income, allowing businesses to raise prices. Services inflation rose from 3.3 percent to 3.5 percent, which the RBA views as a sign of persistent domestic price pressures. Additionally, goods inflation reached 3 percent, primarily due to rising power prices.

Despite the inflation data, financial markets have adjusted their expectations for a November rate cut. The likelihood of a cut has dropped from 80 percent to less than 10 percent. Analysts suggest that the practical chances of a rate cut next week are virtually zero unless significant global economic disruptions occur.

Looking ahead, the market anticipates only one more rate cut, likely not until May of next year, following additional inflation data. There are calls for the RBA to consider measures to control soaring property prices, especially if inflation remains high. The recent job numbers, if confirmed, could present further challenges for the RBA, which has been proud of maintaining post-COVID job gains while managing inflation.

The potential for stagflation—a combination of stagnant economic growth, rising unemployment, and high inflation—could become a pressing issue for the RBA. As the economic landscape evolves, the central bank faces difficult decisions regarding monetary policy and its impact on employment and inflation.