Australia’s shopper costs rose greater than anticipated in January, whereas core inflation climbed to its highest degree in over a yr, solidifying market expectations for one more RBA rate of interest hike.
The month-to-month headline CPI rose 0.4% in January, beating the median forecast of a 0.3% uptick and conserving the annual studying regular at 3.8% as a substitute of dipping to the projected 3.7% determine. The extra intently watched trimmed imply measure, which is taken into account a proxy for underlying or “core” inflation, ticked as much as 3.4% year-over-year from 3.3% beforehand, reaching its highest degree in 16 months.
Key Takeaways
- Headline CPI: +0.4% month-on-month; +0.5% seasonally adjusted. Consensus was +0.3%.
- Annual CPI: +3.8% year-over-year, unchanged from December 2025 and effectively above the RBA’s 2–3% goal band.
- Trimmed Imply (Core): +3.4% yearly, up from 3.3%, reached the best studying in 16 months and a key hawkish sign.
- Largest annual contributors: Housing (+6.8%), Clothes & Footwear (+5.6%), Alcohol & Tobacco (+5.0%), Training (+5.4%).
- Electrical energy prices surged 32.2% year-over-year, pushed largely by the expiry of Commonwealth and State Authorities vitality rebates.
- Non-discretionary inflation ran hotter at +4.1% yearly vs. discretionary at +3.5%, including to cost-of-living pressures.
The biggest contributor to the month-to-month rise was Housing (+2.2% MoM), propelled virtually solely by electrical energy prices leaping 18.5% in January alone as households exhausted their Vitality Invoice Aid Fund (EBRF) rebates. Stripping out the rebate distortion, electrical energy costs rose a extra modest 4.5% over the yr.
Whereas a few of the month-to-month spike was nonetheless attributable to this one-off electrical energy issue, the breadth of worth pressures throughout companies, housing, and well being suggests underlying demand is proving extra resilient than policymakers might have hoped.
Hyperlink to official ABS Australian Shopper Worth Index (January 2026)
On the draw back, Recreation & Tradition fell 3.4% on the month largely because of a pointy pullback in worldwide airfares after robust December demand, offering a partial offset.
Markets raised the likelihood of an RBA fee hike on the Could assembly to roughly 80%, up from round 76% earlier than the discharge, based on Reuters.
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Market Reactions
Australian Greenback vs. Main Currencies: 15-min
AUD Overlay 15-min – Chart Sooner with TradingView
The Australian greenback, which had been cruising slowly greater main as much as the inflation launch, jumped greater throughout the board upon seeing one other set of stronger-than-expected outcomes. In spite of everything, the RBA had already hiked rates of interest in its newest choice and stored the door open for additional tightening ought to inflation keep elevated.
The Australian foreign money sustained its bullish response because the Asian session progressed, although rallies appeared muted whereas markets braced for Trump’s State of the Union handle.
AUD superior 0.34% in opposition to USD a number of hours after the numbers had been printed, adopted by a 0.30% lead in opposition to CAD. Positive factors in opposition to NZD had been restricted at 0.19% whereas raking in a 0.23% uptick in opposition to GBP.
