While the headline CPI rate was high, as expected, at 4.0%, there is good news in the August inflation report with core inflation dipping slightly.
The RBA’s preferred measure of core inflation (the trimmed mean) decelerated from 0.5% in the month of July to 0.2% in August, a pace consistent with the annual target of 2.5%.
This was helped by the fact that the trimmed mean this month excluded the outliers of automotive fuel and electricity.
While this doesn’t change the reality that these costs are pinching the household budget, the RBA should be less inclined to hike rates again in November based on this underlying pace of inflation.
As such, we continue to forecast rates on hold for the balance of 2026 but still consider there is a risk of another hike next year, most likely in February.
We do not have any rate cuts in our forecast for 2027.
Related Articles
-
Bendigo Bank September 2026 Economic Update
High household spending and overseas factors point to impending interest rate rise for Australian households -
Bendigo Bank August 2026 Economic Update
This month Bendigo Bank's Chief Economist, David Robertson discusses interest rates staying on hold and factors impacting markets and property prices. -
Bendigo Bank July Economic Update
Bendigo Bank's Chief Economist, David Robertson, forecasts rates and property trends for homeowners as the new financial year kicks off.
