A Peak Before Christmas? The RBA Sees Headline Inflation Topping Out at 4.5%

Sonal Goyal

12 November 2026 05:49 PM AEDT

A Peak Before Christmas? The RBA Sees Headline Inflation Topping Out at 4.5%

Image Source: Shutterstock

You are reading a free article with opinions that may differ from the recommendation given by Kalkine in its paid research reports. Become a Kalkine member today to get access to our research reports, in-depth technical and fundamental research. Learn more

Start Your Free Trial Now!

Key Highlights

The RBA expects headline Inflation to peak at 4.5% in the December 2026 quarter.
The Statement says inflation is expected to remain above 3% until end-2027.
The monthly CPI indicator recorded 4.3% for the September month.
The forecasts depend on a market-based cash rate assumption.

The Reserve Bank's November forecasts place the high point for headline inflation in the December 2026 quarter, but the climb down from that summit is projected to be gradual rather than swift.

When a Central Bank publishes a forecast that inflation will rise before it falls, the natural question is how high, and for how long. The Reserve Bank of Australia (RBA) answered the first half of that question in its November 2026 Statement on Monetary Policy (SMP). In the Outlook chapter it states plainly: "Headline inflation is expected to peak at 4.5 per cent in the December 2026 quarter".

That projection frames the period households are living through right now. The December quarter runs from October to the end of December, which means the forecast high point sits squarely across the Christmas and holiday spending season.

How the forecast peak compares with earlier expectations

The most striking feature of the 4.5 per cent figure is how much it has moved. In the August SMP, the RBA forecast headline inflation of 3.6 per cent for the year to the December 2026 quarter. Less than three months later, that projection has been lifted by almost a full percentage point.

The RBA's November forecasts, finalised on 28 October 2026, set out the following year-ended path for headline Consumer Price Index (CPI) inflation, with the August forecast in brackets where one was published:

June 2026: 3.9 per cent
December 2026: 4.5 per cent (3.6)
June 2027: 3.7 per cent (2.8)
December 2027: 2.7 per cent (2.6)
June 2028: 2.5 per cent (2.4)
December 2028: 2.4 per cent (2.4)

Read from top to bottom, the table shows a hump. Inflation rises from 3.9 per cent to 4.5 per cent, then begins to ease. By the middle of 2027 it is projected to be back at 3.7 per cent, and it is not until the end of 2027 that it falls below 3 per cent. By 2028 the forecasts for headline inflation are close to, or identical with, what the RBA expected in August.

Why the near-term numbers jumped

The single biggest change between the two forecast rounds relates to energy. The Outlook chapter notes that "The assumed oil price in the December quarter is 35 per cent higher than assumed in August". Oil feeds quickly into headline inflation because fuel is a direct household purchase and because transport costs flow through to many other goods.

The RBA also expects some of that higher oil price to persist. The same chapter says oil is "assumed to be 11 per cent higher by end-2028 than assumed in August." That is a much smaller gap than the 35 per cent difference in the December quarter, which helps explain why the inflation forecasts converge with the August projections further out.

At her media conference on 3 November, Governor Michele Bullock was careful to separate the oil shock itself from the reason for the Board's decision: "we are not tightening monetary policy because of the direct impact of oil prices on inflation." She added: "Monetary policy cannot impact global oil prices." The concern, as she described it, is about what higher prices could do to broader behaviour: "It is critical that we stop expectations for high inflation from becoming embedded in price-setting decisions".

Where inflation stands today

The forecast peak of 4.5 per cent can be confusing alongside the figures already published, so it helps to keep the measures separate.

The most recent quarterly reading, cited in the SMP Overview, is that "Headline inflation was 3.9 per cent over the year to the September quarter and trimmed mean inflation was 3.7 per cent." The quarterly headline figure of 3.9 per cent is the measure the 4.5 per cent forecast should be compared with.

The RBA website also shows the monthly CPI indicator, which recorded annual headline inflation of 4.3 per cent in the September month of 2026. That is a different measure, built from monthly data, and it is not directly comparable with the quarterly figures used in the forecast table. The next monthly CPI release is scheduled for 25 November 2026.

Trimmed mean inflation, the RBA's preferred gauge of underlying price pressure, tells a slightly different story. It was 3.7 per cent over the year to the September quarter and is forecast at 3.6 per cent for December 2026, then 3.5 per cent in June 2027. Unlike headline inflation, it is not projected to spike. That is consistent with an energy-driven bump in the headline figure sitting on top of underlying inflation that is already elevated and easing only slowly.

What a peak does and does not mean

A peak in year-ended inflation does not mean prices start falling. It means the rate at which prices are rising stops accelerating. Even on the RBA's forecasts, headline inflation in June 2027 is still 3.7 per cent, and the Overview states that "Headline and trimmed mean inflation are now expected to remain above 3 per cent until end-2027".

The Monetary Policy Board's statement put it this way: "Inflation is now forecast to remain elevated through much of 2027". That language is a reminder that the peak is only one point on a longer path.

The forecasts also rest on assumptions. The market-based cash rate path in the SMP "increases by 35 basis points by mid-2027, before declining a little to stabilise at 4.8 per cent in 2028." The oil and Exchange Rate assumptions are similarly conditional. If any of those inputs change, so could the shape of the inflation hump.

For now, the cash rate target sits at 4.85 per cent, following the Board's 25 basis point increase on 3 November, effective 4 November. The next decision is due at 2.30 pm on 8 December 2026.

The bottom line

The RBA expects headline inflation to reach its high point of 4.5 per cent in the December 2026 quarter, well above the 3.6 per cent it forecast in August, largely because of a sharply higher oil price assumption. Its forecasts show inflation easing from there, but staying above 3 per cent until the end of 2027. Underlying inflation, measured by the trimmed mean, is not expected to spike in the same way, but it is also expected to ease only slowly. A peak, if it arrives as forecast, would mark the end of acceleration rather than a return to normal.

Download Free Report – Explore 3 Stock Ideas & Industry Insights

Unlock 3 stock ideas and key industry insights in our free report. This information is general in nature and does not consider your personal objectives, financial situation, or needs. It is not financial advice.

All investments involve risk—consider independent advice before making any investment decisions.

View 3 Research Reports

Disclaimer:

This article (“Article”) has been prepared by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and its related bodies corporate who are authorised to provide general financial product advice. Kalkine.com.au and its associated pages are published by Kalkine.

Any information/advice provided in this article is general in nature and does not take into account your objectives, financial situation or needs. You should therefore consider whether the information is appropriate for your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Memorandum or other offer document (“Offer Document”) for the securities or other financial products referred to in Kalkine articles. You should obtain a copy of the Offer Document and consider it before making any decision about whether to acquire the security or financial product.

Kalkine strongly recommends that you seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) before acting on any advice/information in this Article or on the Kalkine website. Not all investments are appropriate for all people.

The information in this Article and on Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of the information contained in its articles (including this Article), newsletters and websites. All information represents our views at the date of publication and may change without notice.

The information in this Article does not constitute an offer to sell securities or other financial products or a solicitation of an offer to buy securities or other financial products.

Kalkine does not issue, sell or deal in any financial products.

This Article may contain information on past performance of particular investments. Please note past performance is neither an indicator nor a guarantee of future performance.

To the extent permitted by law, and excluding any dishonesty or gross negligence by Kalkine, Kalkine disclaims and excludes all liability for any direct, indirect, implied, punitive, special, incidental or other consequential loss or damage arising from the use of or reliance on this Article, the Kalkine website and any information published on the Kalkine website without any warranties or representations by Kalkine to you. To the extent the law prohibits or limits this exclusion, Kalkine limits its liability to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

Employees and/or associates of Kalkine and its related entities may hold interests in the securities or other financial products covered in this Article or on the Kalkine website. Any such employees and associates are required to comply with certain safeguards, procedures and disclosures as required by law.

Some of the images/music that may be used in the Article are copyright to their respective owner(s). Kalkine does not claim ownership of any of the pictures displayed/music used in the Article unless stated otherwise. The images/music that may be used in the Article are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated or was found to be necessary.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.