Aussie inflation print justifies RBA rate hike

In a classic scheduling error, the Australian Bureau of Statistics (ABS) released the August quarter consumer price inflation (CPI) report a day after the Reserve Bank of Australia (RBA) raised the official cash rate by 0.25%.

Tuesday’s media release from the RBA accompanying its 0.25% rate hike noted that “inflation remains elevated and some of the upside risks flagged in August are materialising”, that “recent inflation outcomes in Australia were stronger than expected at the previous meeting”, and that “this inflation impulse is in addition to the effect of capacity pressures in the economy”. 

Today’s CPI release from the ABS justified the RBA’s decision to hike rates, with headline CPI inflation rising to 4.0% year-on-year, up from 3.5% in the 12 months to July 2026, led by housing, which rose by 5.7%.

The policy-relevant trimmed mean inflation also remained at 3.6%—still well above the RBA’s 2-3% inflation target:

The following charts from Alex Joiner at IFM Investors show that trimmed mean inflation remains too hot for the RBA, with the monthly rate of growth firming in August:

Charts from Alex Joiner (IFM Investors)

Thus, the RBA was justified in hiking on Tuesday, and unless inflation trends lower, further increases are likely, as financial markets forecast: