Will inflation force the RBA’s hand on an interest rate rise?

The chances of a rate hike after next year’s federal election are growing after a surprise spike in inflation from record-high petrol prices and surging home-building costs.

On Tuesday, the Australian Bureau of Statistics reported consumer prices increased 0.8 per cent in the September quarter to be up 3 per cent over the year.

The headline inflation number was in line with market expectations. Underlying inflation – which excludes one-off and volatile items – reached a six-year high of 2.1 per cent.

The RBA says it expects to hold the official interest rates until at least 2024 but financial markets, which pushed the Australian dollar and bond rates up after the inflation figures, believe the RBA will raise interest rates.

Today on Please Explain, senior economics correspondent Shane Wright joins Nathanael Cooper to make sense of the inflation conundrum.

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