Inflation has soared to a four-month high of 4 per cent - increasing the chance of a November rate hike.

The consumer price index in August climbed sharply from July’s 3.5 per cent level as the Federal Government withdrew its fuel tax relief just before tensions escalated again in the Middle East.

Automotive fuel prices surged by 13.5 per cent over the year but during August alone, prices increased by 14.8 per cent leading to overall transport costs rising by 5.6 per cent on an annual basis.

Goods inflation rose by 4.2 per cent over the year, as a result of elevated crude oil prices, while services inflation went up by 3.7 per cent.

Overall annual headline inflation has now been above the Reserve Bank’s 2-3 per cent target for the 13th straight month, increasing the chance of a November 3 rate hike.

Underlying inflation without volatile price items was also elevated, rising by an annual pace of 3.6 per cent in August with the RBA’s preferred measure of price pressures also above target for the 13th consecutive month.

Treasurer Jim Chalmers blamed the oil crisis for Australia’s inflation problem.

“These numbers confirm the overwhelming influence on inflation in August was higher global oil prices,” he said.

“All of the increase in annual headline inflation was from a combination of higher fuel costs and the unwinding of last year’s energy rebates.”

The Australian Bureau of Statistics delivered the bad news a day after the RBA on Tuesday increased interest rates for the fourth time this year to a 15-year high of 4.6 per cent and another increase on top of that on November 3 would take it to an 18-year high of 4.85 per cent.

“Essentially today’s data validates the RBA’s decision yesterday to raise rates as it shows inflation is still far from under control, leaving the RBA with no choice but to act,” KPMG chief economist Brendan Rynne said.

EY senior economist Paula Gadsby is also bracing for another rate hike by the end of the year.

“We expect the board may need to raise interest rates again before the end of the year if, as we expect, inflation momentum fails to moderate,” she said.

Despite the prospect of higher interest rates as a result of higher inflation, the Australian dollar paradoxically by 0.4 of a US cent to 69.60 US cents after the inflation data was released.