A hold in the cash rate during the upcoming November monetary policy meeting appears to now be a certainty off the back of skyrocketing inflation during the September quarter.
The Australian Bureau of Statistics (ABS) has revealed that the consumer price index (CPI) rose 1.3 per cent in the September 2025 quarter and 3.2 per cent annually.
According to ABS head of prices statistics, Michelle Marquardt, this latest data print marks the highest quarterly rise since March 2023, with the primary driver of this quarterly movement being electricity costs, which rose by 9 per cent over the quarter.
Additionally, annual inflation was up from 2.1 per cent in the June 2025 quarter – the highest annual inflation rate since the June 2024 quarter, when annual inflation sat at 3.8 per cent.
The all-important trimmed mean annual inflation figure showed a surge to 3 per cent in the September quarter, up from 2.7 per cent in the June quarter.
Marquardt stated this is the first time trimmed mean annual inflation has increased since December 2022.
Meanwhile, the September 2025 monthly CPI indicator also rose by 3.5 per cent in the 12 months to September, up from 3 per cent in the 12 months to August.
According to the ABS, the most significant contributors were housing (5.6 per cent), food and non-alcoholic beverages (3.1 per cent), and alcohol and tobacco (5.5 per cent).
This quarterly result has shattered economists’ expectations, which ranged from a quarterly rise of 0.8–1.1 per cent.
APAC economist at State Street Investment Management, Krishna Bhimavarapu, said today’s data “carried a sting in the tail for 3Q”.
“This more than offsets the impact of the recent rise in unemployment and provides enough justification for the RBA to maintain their outlook,” he said.
“The largest jump in property rates since 2014 is worrying, but under the hood the jump was also led by electricity prices – muddied by subsidies and annual reviews, alcohol and tobacco prices also contributed but, the drop in insurance premiums is significant and is quite welcome.”
Bhimavarapu added that State Street continues “to stress caution”, particularly as the recent increase in unemployment (which rose to 4.5 per cent over August) appears “more structural, especially against a challenging global backdrop”.
“For this reason, we continue expecting one rate cut by December,” he said.
ANZ senior economist Adelaide Timbrell stated this result is “likely much higher than the RBA’s forecast for 3Q trimmed mean inflation from their August Statement of Monetary Policy, which does not include 1Q and 3Q forecasts but shows 4Q inflation at 2.6 per cent y/y, much lower than the current 3.0 per cent y/y”.
“This is likely to lead to caution from the RBA on future easing until evidence of disinflation emerges,” she added. “We expect the RBA to hold the cash rate until at least February 2026.”
Luci Ellis, Westpac’s chief economist, remarked: “Again it comes down to the CPI data,” and that the trimmed mean reading of 1 per cent per quarter and 3 per cent per year is “too high for the RBA’s comfort”.
“Indeed, earlier this week the RBA governor characterised an outcome of 0.9 per cent on the quarter as ‘a material miss’.
“The Monetary Policy Board (MPB) will therefore opt to be cautious and wait and see inflation approach closer to the midpoint of the target range before considering further cuts.
“The RBA will instead keep the cash rate on hold at its November meeting next week. There were possible outcomes today that would have pointed to a different decision, but not this one.”
The RBA will likely not be in a position of comfort on inflation until the next quarterly inflation reading due early next year, right before the February 2026 meeting, according to Ellis.
“It will only have one read of the new full monthly CPI ahead of the December meeting and will be reluctant to take too much signal from this new measure,” she said.
“Even a February cut is far from certain now, given the size of the upside surprise this quarter. We are conducting a full reassessment for the cash rate outlook in light of both the inflation outcome and the evolving picture on domestic demand.”
