Date: Wednesday, 25 March at 11.30am AEDT
For January, inflationary pressures rose at the start of the year, with headline CPI holding steady at 3.8% YoY in January, matching December but topping expectations of 3.7%. The RBA’s preferred trimmed mean rose to 3.4% from 3.3%.
Key drivers included:
- Housing (up 6.8% YoY)
- Electricity (up 32.2% annually from subsidy unwind)
- Rents (up 3.9%)
- Medical services (up 4.2%)
- Goods inflation lifting to 3.8%
- Services easing slightly to 3.9%.
Looking to the February report, expectations point to headline inflation rising to around 3.9% YoY, with the trimmed mean anticipated to hold steady at 3.4%.
This release follows the RBA’s hawkish rate hike to 4.10%, reflecting concerns about persistent inflation and upside risks from rising energy prices tied to the Middle East conflict. February’s numbers will inform the RBA’s thinking ahead of the May meeting but will be superseded by the March quarterly and first quarter (Q1) inflation update on 29 April, just before the 5 May decision.
The Australian rates market shows 18 bp of tightening now priced in for the RBA’s May Board meeting. Further out, 67 bp of hikes are priced in for the remainder of 2026.
This aligns closely with expectations for three more 25 bp increases this year, which would take the RBA’s cash rate to 4.85% – a level not seen in 17 years, dating back to November 2008.
Trimmed mean CPI YoY chart