Australian inflation rises, delaying RBA rate cuts into 2026

Australia’s consumer prices rose sharply in the September quarter, pushing inflation above the central bank’s target band and all but eliminating the chance of an interest rate cut when the Reserve Bank meets next week. The Australian Bureau of Statistics reported the consumer price index rose 1.3 percent in the third quarter, the largest quarterly increase since March 2023, taking annual headline inflation to 3.2 percent. The RBA’s preferred trimmed mean measure of underlying inflation increased 1.0 percent for the quarter and 3.0 percent year on year.

The stronger than expected reading reversed market bets that had been building for an early easing of monetary policy after a surprise rise in the unemployment rate. Economists and traders reacted quickly, with market pricing for a November rate cut plunging to the low single digits and most forecasters now expecting the RBA to hold the cash rate at 3.60 percent at its November meeting and likely through December.

Reserve Bank Governor Michele Bullock had signalled earlier in the week that even a 0.9 percent quarterly rise in the trimmed mean would be a “material miss” of the bank’s forecasts, a remark that underscored...