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Australia CPI cools, shifting expectations for 2026 rate hikes
Underlying trimmed mean inflation rose 0.8% in Q2, below the RBA forecast, and Westpac Economics said it no longer expects additional rate hikes in 2026.
Australia’s Q2 CPI report came in below expectations, with headline inflation up 0.6% in the quarter versus 1.4% in Q1, a slowdown driven by a smaller contribution from auto fuel prices, a temporary halving of the fuel excise tax, and falling global oil prices, according to Action Forex.
The report also surprised to the downside on the RBA’s preferred measure: underlying trimmed mean inflation rose 0.8% in Q2 (3.6% year over year), 0.2 percentage points below the RBA’s May Statement on Monetary Policy forecast.
Action Forex said housing and market services were key areas being watched, and prices in those sectors were rising at a much less alarming pace, easing concerns about rapid or exaggerated pass-through.
After the CPI release, Action Forex noted Westpac Economics Chief Economist Luci Ellis said Westpac no longer expects additional rate hikes in 2026, even as the RBA’s Monetary Policy Board is expected to maintain a hawkish posture until risks fully subside. Offshore, the Federal Open Market Committee left US rates unchanged at its July meeting, with policy decisions expected to be informed by coming data and potential risks from energy and semiconductor price shocks.