RBA Raises Interest Rates to 4.60%, Inflation Pressures Extend Global Tightening Cycle

On September 29, global inflation pressures came back into focus. The Reserve Bank of Australia announced an interest rate hike of 25 basis points to 4.60% and indicated that further tightening may be necessary if needed. Despite a cooling in Australia's consumer and housing markets, economic growth and inflation performance remain above expectations. Additionally, the conflict in the Middle East has driven up energy prices, and the demand for AI has led to price increases in technology products, making it difficult for the central bank to relax monetary policy too soon. This reflects that when energy and technology demand jointly push up costs, inflation may still limit the global space for interest rate cuts, even as economic activity gradually slows.

The commodities market is showing deeper supply risks. Deutsche Bank pointed out that the U.S. continues to stockpile copper due to tariff expectations, which is compressing spot supply available in other regions. The bank's extreme scenario estimates that if the hoarding trend continues, copper prices could rise to $22,050 per ton by the second quarter of 2027, although this is not the baseline forecast. What is truly concerning is that global inventory does not equate to freely available supply; when inventory is locked in specific markets, even without a significant increase in demand, spot shortages can drive up prices and further increase cost pressures for grid construction, AI data centers, and manufacturing.

For financial markets, these two developments share a common transmission mechanism: rising energy and raw material prices may delay the decline in inflation, forcing central banks to maintain higher interest rates for a longer period. If companies simultaneously face rising financing and input costs, the discount pressure on valuations for future profits will also increase. Future market focus should not only be on whether central banks will cut rates, but also on whether energy prices, industrial raw material supply, and long-term bond yields are under synchronized pressure. If cost-pushed inflation persists while economic growth gradually slows, global markets will face a dual challenge of stubborn inflation and high funding costs, potentially restricting the liquidity and valuations of risk assets.

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