Australia’s 10-year bond yield climbed to 4.22%, the highest level in two weeks, after hotter-than-expected inflation reading dampened hopes of an imminent interest-rate cut. Annual inflation rose to a more than one-year high of 3.5% in September from 3% in August, surpassing the 3.1% forecast and moving further above the Reserve Bank’s 2-3% target range. In the third quarter, inflation accelerated to 3.2% from 2.1% previously, above expectations of 3%. Crucially, trimmed mean inflation, the RBA’s preferred gauge of underlying price pressures, increased to 3% in Q3 from 2.7% in Q2, also exceeding the anticipated 2.7%. Markets have sharply reduced the odds of a rate cut at at next week’s policy meeting to just 8%, compared to 40% before the data. Earlier this week, Governor Michele Bullock also downplayed the recent surge in unemployment, saying the labor market is still tight and stressing the board’s cautious policy stance.
