Australia CPI expected to edge higher in September and Q3, but to remain below RBA target

Australia will release inflation updates on Wednesday, one week ahead of the Reserve Bank of Australia (RBA) monetary policy meeting, scheduled for November 3-4. The Australian Bureau of Statistics (ABS) will publish two different inflation gauges: the quarterly Consumer Price Index (CPI) for the third quarter of 2025, which is expected to rise 1.1%, and the September Monthly CPI, which is forecast to edge higher by 3.1%. The quarterly report includes the RBA Trimmed Mean CPI, policymakers’ favorite inflation gauge.

The ABS, however, announced it will change the way of reporting inflation data starting next month, “transitioning from the quarterly Consumer Price Index (CPI) to a complete Monthly measure of the CPI in November 2025.” The decision is meant to provide more timely and comprehensive information, align with all other G20 countries’ reporting to facilitate comparisons of inflation trends, and provide the community with more timely and accurate data.

Meanwhile, the RBA’s Official Cash Rate (OCR) stands at 3.6% after policymakers delivered three 25-basis-point (bps) rate cuts throughout the year.

Ahead of the CPI release, the Australian Dollar (AUD) trades around 0.6550 against its American rival, with financial markets struggling for direction amid the United States (US) government shutdown and central banks’ monetary policy decisions.

What to expect from Australia’s inflation rate numbers?

The ABS is expected to report that the monthly CPI rose by 3.1% in the year to September, slightly higher than the August print at 3%. The quarterly CPI is foreseen to increase by 1.1% QoQ and by 3% YoY in the third quarter of 2025, above the 0.7% and 2.1% posted in Q2. Additionally, the central bank’s preferred gauge, the RBA Trimmed Mean CPI, is expected to rise by 2.7% YoY in the same quarter, matching its previous reading. Finally, the RBA Trimmed Mean CPI is forecast to increase by 0.8% QoQ, higher than the previous 0.6%.

The RBA’s goal is to keep inflation between 2% and 3%, so these figures would not be considered worrisome, as a modest uptick above the upper end would not change policymakers’ view. If it becomes a trend, however, markets will quickly price in no more rate cuts in the foreseeable future.

The RBA kept the OCR at 3.6% when it met in September, and the accompanying statement noted that “components of monthly CPI are a little higher than expected, yet inflation is not running away,” a sign that officials were not concerned about inflation.

The Minutes of the meeting, released two weeks afterward, showed that board members agreed that the policy is still a little restrictive but difficult to determine. They also noted that it would be important to see what the Q3 data reveal about the economy and supply capacity.

More relevantly, policymakers anticipated inflation may tick higher in Q3: “Members discussed the implications to be drawn from the monthly CPI indicator outcomes for July and August. While noting the partial and volatile nature of these data, members observed that the outcomes for certain components of the indicator – including market services and housing – suggested that the September quarter inflation outcome might be higher than the staff had expected in August. Members noted that the combination of potentially higher-than-expected inflation and broadly stable labour market conditions, if sustained, could imply that the staff’s assumption regarding the balance between aggregate demand and potential supply was incorrect.”

Meanwhile, the US government shutdown continues. The Senate stalemate has lasted three weeks already, with Democrats and Republicans unable to find common ground on a funding bill. As a result, the US Dollar (USD) is unable to attract buyers; moreover, given that the Federal Open Market Committee (FOMC) is holding its two-day meeting and will announce its decision on monetary policy later on Wednesday.

How could the Consumer Price Index report affect AUD/USD?

The anticipated inflation readings could have a limited impact on the AUD, as it seems unlikely they would affect RBA officials’ upcoming decisions. Much lower-than-anticipated numbers could fuel hopes for a soon-to-come interest rate cut, and put pressure on the Aussie. Higher-than-anticipated figures, on the contrary, will support the current cautious approach to interest rate changes, but also have a limited impact on future RBA decisions.

As previously noted, the AUD/USD pair hovers around the 0.6550 level ahead of the announcement, consolidating ahead of clearer directional clues.

Valeria Bednarik, FXStreet Chief Analyst, says: “The AUD/USD pair consolidates near a weekly high of 0.6564, technically biased higher, albeit lacking momentum. In the daily chart, the pair develops above all its moving averages, with the 20 Simple Moving Average (SMA) converging with the 100 SMA at around 0.6530, providing immediate support. The same chart shows technical indicators hold directionless near their midlines, maintaining a neutral stance.”

Bednarik adds: “An acceleration through the aforementioned weekly high exposes the 0.6600 threshold, en route to 0.6630. On the other hand, a slide towards the 0.6530 level could see the pair extending its slide initially towards 0.6490, and then towards the 0.6440 region, where the pair found buyers this week.”