Key Highlights

  • The RBA forecasts headline and underlying Inflation at 2.5 per cent in the June quarter of 2028.
  • The RBA's target band is 2 to 3 per cent, with 2.5 per cent as the midpoint.
  • The path to the midpoint is longer and steeper than the RBA had forecast in August.
  • The forecast depends on the cash rate path and the assumed oil price.

For the Reserve Bank of Australia (RBA), which targets inflation of 2–3 per cent, the midpoint of that band is the number that matters most. The Statement on Monetary Policy (SMP) released on 3 November 2026 says inflation reaches that midpoint in mid-2028.

That date arrives more than a year and a half from now, and it sits at the end of a forecast path that has been pushed higher in the near term. Understanding why the RBA expects to get there, and what the forecasts assume along the way, helps explain the Monetary Policy Board's decision the same day to raise the cash rate target by 25 basis points to 4.85 per cent.

Two measures, one destination

The RBA tracks two main inflation gauges. Headline CPI captures the change in the price of the whole consumer basket. The trimmed mean is an underlying measure that strips out the largest price rises and falls each quarter, giving a clearer view of the broad trend.

In the November SMP forecasts, both measures land at the same place by the June quarter of 2028:

  • Headline CPI: 2.5 per cent year-ended in June 2028 (August forecast: 2.4 per cent), then 2.4 per cent in December 2028.
  • Trimmed mean: 2.5 per cent year-ended in June 2028 (August forecast: 2.4 per cent), then 2.4 per cent in December 2028.

Those are RBA forecasts, not outcomes, and they are conditioned on a set of assumptions about interest rates, oil prices and the exchange rate.

A higher hump before the descent

The journey to the midpoint looks quite different from the one sketched three months ago. The SMP says the inflation outlook has been "revised materially higher", with headline and underlying inflation both expected to remain above 3 per cent until the end of 2027. Higher energy prices linked to the Middle East conflict have added to the pressure.

The forecast table shows how the profile has changed (year-ended, August forecast in brackets):

  • Headline CPI: 4.5 per cent in December 2026 (3.6), 3.7 per cent in June 2027 (2.8), 2.7 per cent in December 2027 (2.6).
  • Trimmed mean: 3.6 per cent in December 2026 (3.3), 3.5 per cent in June 2027 (3.0), 2.9 per cent in December 2027 (2.6).

Headline inflation is forecast to peak at 4.5 per cent in the December quarter of 2026. The Monetary Policy Board's statement notes that inflation returns to the top of the target range in late 2027, about three quarters later than previously forecast. In its words, "Inflation is now forecast to remain elevated through much of 2027".

The latest actual figures show where the starting point is. Headline CPI rose 3.9 per cent over the year to the September quarter, unchanged from the June quarter. The trimmed mean rose 3.7 per cent over the same period. On the monthly measure, headline CPI was 4.3 per cent year-ended in September 2026.

What has to happen for the midpoint to arrive

The mid-2028 landing depends on several conditions set out in the SMP.

Interest rates. The forecasts assume a cash rate path based on market pricing as at 28 October 2026. That pricing implies the cash rate rises about 35 basis points by mid-2027, up to 50 basis points above the August path, and then stabilises at 4.8 per cent in 2028. The assumed year-average cash rate is 4.9 per cent in 2026/27 and 4.8 per cent in 2027, 2027/28 and 2028. This is market pricing, not an RBA promise; the Bank judges this path to be restrictive.

Energy. The RBA's Brent Crude assumption falls from US$109.5 a barrel in December 2026 to US$79.1 in December 2028. Refined fuel margins are assumed to return to historical averages by mid-2027, about two quarters later than assumed in August. Energy cost pressures are expected to ease from mid-2027, though by less than previously thought.

A cooling economy. GDP growth is forecast to slow to 1.3 per cent by December 2027 and stay there through June 2028, while Unemployment is forecast to rise to 5.0 per cent by June 2028 and 5.1 per cent by the end of that year.

The Monetary Policy Board's statement says, "The economy is slowing." It adds that "The increases in the cash rate target since the beginning of the year have tightened financial conditions." Five 25-basis-point rises in 2026 have taken the cash rate target from 3.60 per cent to 4.85 per cent.

Why the date could move

The SMP is candid that the mid-2028 date is not fixed. Domestic inflation risks remain skewed to the upside, according to the RBA, while risks to domestic activity are broadly balanced.

On the upside, the RBA identifies a prolonged energy disruption and strong AI-related Investment as risks. One scenario in the SMP has Crude Oil staying around US$100 a barrel with elevated refined product prices; in that case underlying inflation would be around 2¾ per cent by end-2028 rather than about 2½ per cent, meaning the midpoint would not be reached within the forecast period.

On the downside, inflation could fall faster if higher interest rates and falling housing prices weigh more heavily on spending. Housing prices have fallen about 5 per cent from their March peak, according to the SMP.

The majority of the Board was concerned about expectations. The statement records that "there is an increasing risk that higher inflation expectations will become embedded" and that "a further tightening in financial conditions is warranted to support the return of inflation to target." Six members voted for the increase and three voted to hold the cash rate at 4.60 per cent; the statement gives no reasons for the minority view.

The bottom line

The RBA's November forecasts have both headline and trimmed-mean inflation reaching 2.5 per cent, the midpoint of the 2–3 per cent target band, in mid-2028. Before that, headline inflation is forecast to peak at 4.5 per cent in the December quarter of 2026, and both measures are expected to stay above 3 per cent until the end of 2027.

The midpoint forecast rests on a cash rate path drawn from market pricing at 28 October, an oil price assumption that falls steadily, and an economy that grows below trend with rising unemployment. Any of those could change. The Board said it "will continue to do what it considers necessary to bring inflation sustainably back to target." The next pieces of evidence arrive with the CPI release on 25 November 2026 and the Board's next decision on 8 December 2026.