Today’s monthly inflation data will give RBA fresh reason to keep rolling their worry beads. The central bank’s preferred inflation gauge, the trimmed mean underlying inflation measure, rose by 0.3% in January. This monthly pace matches December 2025 and, notably, five of the past six months have recorded a 0.3% monthly increase.
Revisions to historical data lifted the annual underlying inflation rate to 3.4% in January, up from 3.3% in December and slightly above consensus forecasts. This is a relatively new inflation series that will eventually see the quarterly series cease. It dates back only to April 2024 and January’s annual rate is the highest since its inception.
The largest contributors to annual inflation were housing (+6.8%), food and non-alcoholic beverages (+3.1%) and recreation and culture (+3.7%).
Yesterday, the Australian Business Economists (ABE) held their annual conference. Under the banner Macro Meets Machine: The Economic Outlook in the Age of AI, RBA Head of Economic Analysis, Michael Plumb, quipped that it felt like “the economist’s version of The Terminator.”
Michael was the first speaker and he indicated that while the RBA is using and closely monitoring the new monthly inflation measure, the quarterly inflation data remains the Bank’s benchmark focus for now. This reflects the time needed to properly understand the statistical properties of the new monthly inflation series, including its seasonal patterns. The quarterly inflation report is next our in late April.
The RBA has been cautious in the past, typically waiting for the quarterly inflation data release, which favours a May move over March. However, upgrades to the RBA’s inflation forecasts earlier this month show that annual underlying inflation does not return to the target band until June 2027 and never quite reaches the 2.5% midpoint over the forecast horizon to June 2028. As a result, a St Patrick’s Day hike cannot be entirely ruled out.
