Australia’s Inflation Gauge Rises Ahead of RBA Decision

Australia’s Monthly Inflation Gauge, compiled by the Melbourne Institute, fell 0.2% month-on-month in February 2026, reversing a 0.2% rise in the previous month and marking the first decline since last August. The pullback likely reflected softer prices for fuel and some discretionary goods after earlier seasonal increases, alongside easing supply-chain pressures. The latest result highlighted progress made in easing inflation over the past year despite signs of renewed cost pressures in H2 of 2025 amid elevated service expenses and a tight labor market. In January, the annual inflation held at 3.8%, unchanged from the prior month but remained outside the central bank’s 2–3% target, suggesting underlying price pressures remain sticky even as headline momentum cools.

Australia’s Monthly Inflation Gauge, compiled by the Melbourne Institute, rose 0.2% month-on-month in January 2026, easing sharply from December’s two-year high of 1% and marking the slowest pace since last August. The latest result comes ahead of the Reserve Bank’s first policy meeting of 2026, following its decision to hold the cash rate at 3.6% for a third consecutive meeting in December. The moderation highlights how earlier monetary tightening is filtering through the economy, tempering demand-side pressures. Even so, policymakers are expected to remain cautious, with underlying inflation still above target and the labor market relatively tight. The central bank is likely to maintain a restrictive stance and stress data dependence in the months ahead.

Australia’s Monthly Inflation Gauge, compiled by the Melbourne Institute, surged 1.0% mom in December 2025, marking the fastest pace since December 2023 and a sharp pickup from 0.3% in the prior two months. The latest result came as the Reserve Bank held the cash rate steady at 3.6% for a third consecutive meeting in the month. Policymakers noted inflation has cooled markedly from its 2022 peak but flagged renewed momentum in recent data. Headline CPI eased to 3.4% yoy in November, the lowest since August, yet still above the central bank’s 2–3% target. Trimmed mean CPI also edged down to 3.2% from October’s eight-month high of 3.3%. The board assessed that inflation risks have modestly tilted upward, while downside pressures, particularly from global conditions, have eased. Board members anticipate just one more rate cut this year, with underlying inflation expected to exceed 3% in the near term before easing to around 2.6% by 2027.