Adrian Vanzyl on the CPI Surprise That Cooled Rate Hike Bets
One day after the Reserve Bank delivered its fourth hike of the year, today’s inflation data pulled the rug out from under expectations of a fifth, and as Adrian Vanzyl, I think the speed of that reversal is the real story. The Australian Bureau of Statistics released August’s monthly CPI figures today, showing underlying inflation held steady at 3.6 per cent, lower than markets had expected. The ASX jumped on the news, and traders sharply cut their bets on a November rate rise, from odds that had looked close to a formality down to around 20 per cent.
Adrian Vanzyl finds Treasurer Jim Chalmers’ explanation for the data worth taking seriously rather than dismissing as political framing. Chalmers said the CPI figures confirm higher global oil prices, not broad domestic demand, overwhelmingly drove August’s inflation. That distinction matters enormously for how the RBA reads the number. Inflation driven by an oil price spike is the kind of external shock a central bank can reasonably expect to fade once the shock passes. Inflation driven by domestic spending strength is a different problem entirely, one that usually calls for sustained higher rates rather than a wait-and-see approach.
Why One Month of Data Won’t Settle the Debate
Adrian Vanzyl thinks the caution in today’s market commentary is worth listening to just as closely as the headline relief. One market analyst noted that August’s data largely reversed some of the more concerning signals from July, but argued that alone would have justified waiting until November, after the more comprehensive September quarter CPI release, rather than hiking yesterday at all. Monthly inflation data is genuinely volatile, and a single month coming in softer doesn’t erase the case the RBA made just twenty-four hours earlier for hiking now.
That tension is already showing up in how economists are positioning for what comes next. VanEck’s head of investments and capital markets has said a December hike is looking increasingly likely given today’s result, even as markets price the November meeting as far less probable. Adrian Vanzyl sees that as the more accurate read: today’s data didn’t convince the market the RBA is finished, it just shifted the timing of what most analysts still expect eventually happens.
Conclusion
I’d read today, in Adrian Vanzyl’s view, as a reminder of how quickly market expectations can swing once new data lands, even when nothing about the underlying economic picture has fundamentally changed. Yesterday the RBA hiked, citing oil prices, AI demand and capacity pressure as real and current risks. Today, oil prices turned out to be doing more of that inflationary work than broad domestic demand, and markets responded by pulling forward their expectation of a pause. Whether that pause holds through the RBA’s December meeting depends on data that hasn’t been released yet, and a single soft month is rarely enough to settle an argument this contested.
