MarketMoodz
Australia inflation hits 3.6% in Q4 2025; RBA cuts unlikely in 2026
Australian inflation rose to 3.6% in Q4 2025, a six-quarter high that keeps price pressures in focus for policy makers. December's CPI came in at 3.8% YoY, with housing leading the uptick, underscoring why the RBA signals restrictive policy into 2026.
Key Takeaways
- Q4 2025 YoY CPI at 3.6%, a six-quarter high
- Q4 2025 QoQ CPI at 0.6%, easing from Q3’s 1.3%
- December CPI at 3.8% YoY, above 3.55% forecast
- Housing component up 5.5% in December, largest contributor
- RBA Governor Michele Bullock signaled rate cuts are not on the horizon in the near term
People Involved
- Michele BullockGovernor, Reserve Bank of Australia
Entities Involved
- Australian Bureau of Statistics (ABS)Official data provider for CPI and GDP
- Reserve Bank of Australia (RBA)Central bank and policy maker
- CNBCNews outlet reporting the ABS data
- ReutersNews agency providing forecasts/polls
MarketMoodz Analysis
The data reinforce the RBA's stance that policy will stay restrictive as inflation sits above the 2-3% target, hurting the case for near-term rate relief. Investors should expect tighter yield curves and possible AUD strength when risk sentiment improves, as traders price in slower inflation progress relative to global peers.
Historically, Australia has wrestled with inflation that runs above target even as growth accelerates—this dynamic has kept the RBA ahead of many peers in policy caution. The December housing surge echoes global housing affordability tightness and underscores how shelter costs drive headline CPI, a pattern seen in other developed markets during post-pandemic normalization.
Looking ahead, markets will watch for more inflation data, wage growth signals, and the US Fed trajectory to gauge cross-asset spillovers. If inflation slows slowly but stubbornly, the RBA may keep policy restrictive through 2026, supporting bonds and the AUD only if global risk sentiment improves and commodity prices stabilize.
Source: Original Article
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