Australia’s Inflation Jumps, Rate Cut Hopes Fade
Australia’s consumer price index (CPI) rose by 1.3% in the third quarter of 2025, pushing annual inflation to 3.2%. The figure overshot market expectations and exceeded the Reserve Bank of Australia’s (RBA) 2–3% target band, raising concerns about the timing of future interest-rate cuts.
Q3 Numbers And Drivers
The quarterly rise of 1.3% was the sharpest in more than two years, with electricity prices surging by 9% as a major contributor. Higher transport and recreation costs also drove the increase. Core inflation, measured by the trimmed-mean, rose 1.0% in the quarter, lifting the annual rate to 3.0%.
Monetary Policy Implications
The hotter-than-expected data has dampened hopes of an immediate rate cut. Market odds of a November cut fell from 40% to just 8% after the release. The RBA is now widely expected to keep its cash rate steady at 3.6% for the near term.
Outlook And Risks
Economists suggest that unless inflation cools significantly, rate cuts may be pushed back until late 2026. Rising wages and global economic pressures remain key risks that could prolong inflationary trends in Australia.
