Australia’s inflation has jumped sharply, rattling markets just one month out from Black Friday shopping, with the Australian dollar surging on the news.

The Australian Bureau of Statistics reported that the Reserve Bank’s preferred measure of core inflation rose 1% in the September quarter, up from 0.6% in Q2.

Annual core inflation now sits at 3%, above expectations of 2.7%.

Headline inflation climbed to 1.3% for the quarter and 3.2% year-on-year.

The hotter-than-expected figures have dashed hopes of an imminent Reserve Bank rate cut, with Governor Michele Bullock (pictured below) indicating that the central bank remains data-dependent on its next decision.

Money markets now see just a 4% chance of a rate cut at the RBA’s Melbourne Cup day meeting next week, down sharply from previous expectations.

Investors reacted immediately. The Australian dollar rallied to US66.07¢, a four-week high, while government bond yields also jumped, flattening the yield curve.

The three-year bond yield gained 8 basis points to 3.54%, and the 10-year yield rose 4 basis points to 4.21%.

The spike in inflation comes amid rising costs for labour-intensive services, rents and the winding back of electricity subsidies, adding pressure on consumers just as retailers ramp up for the Black Friday shopping season.

The ASX 200 dropped 0.6% in intraday trade following the data, reflecting fears that higher-for-longer rates could weigh on economic growth and corporate profits.

Economists warn that while inflation remains above the RBA’s mid-point target of 2.5%, the underlying economy shows signs of resilience.

Yet, with the festive season approaching, households may face tighter budgets, and retailers are bracing for the impact on discretionary spending.

With the Melbourne Cup just days away and Black Friday looming, all eyes will be on the RBA and the pace of price pressures in the lead-up to the holidays.