Australian consumer prices picked up for a fourth consecutive month in October, fresh data revealed on Wednesday, prompting investors to sharply reduce the probability of a Reserve Bank of Australia (RBA) rate cut in May 2026 to just 8%, down from 40% previously. Meanwhile, the likelihood of an interest rate increase by the end of next year has risen to 32%.
According to the Australian Bureau of Statistics, the monthly Consumer Price Index (CPI) rose 3.8% year-on-year in October, topping forecasts for a 3.6% gain and marking the fastest pace in 10 months. This figure continues the upward trend from June’s low point, when inflation slowed to 1.9%.
Meanwhile, the trimmed mean, a key measure of core inflation, accelerated to an annual rate of 3.3% in October from 3.2% in September, moving further away from the trajectory favored by the RBA. Harry Murphy Cruise, head of economic research at Oxford Economics Australia, stated that an interest rate cut is unlikely in the near term, and raises the prospect that a rate hike could become necessary.
October’s release marks the debut of the Bureau’s complete monthly CPI series, replacing the former limited dataset. Despite the enhancement, the RBA has reiterated that it still favors the quarterly figures for a more stable read on inflation because of potential monthly volatility.
Headline inflation in the previous quarter had surged back up to 3.2%, breaching the RBA’s 2-3% target band and stoking worries that current policy still isn’t tight enough to rein in price pressures. This trend has coincided with a jump in home loans and the first signs of consumer optimism seen in the past four years.
Details of the latest report show inflation gains have been broad-based. Services sector prices grew at an annual pace of 3.9% last month, up from 3.5% in September, while housing inflation climbed to 5.9% over the year, despite government rebates on electricity that offered some relief to households in October.
Cherelle Murphy, EY chief economist, stated that the Reserve Bank must take steps to curb inflation and guide it back toward the midpoint of the target band, even though the full effects of this year’s three rate reductions have yet to show up in the broader economy.
