Key Highlights

  • Trimmed mean Inflation rose from 0.8 per cent to 1.0 per cent in the September quarter.
  • The step-up was one of the data points showing pressures were broad.
  • Year-ended trimmed mean inflation is 3.7 per cent.
  • Broad price rises are harder for the RBA to treat as temporary.

Year-ended inflation figures dominate headlines because they are easy to compare with the Reserve Bank of Australia's 2–3 per cent target. Yet the quarterly figures often tell an earlier story about momentum. In the September quarter of 2026, the underlying measure known as the trimmed mean, rose 1.0 per cent in the quarter, up from 0.8 per cent in the June quarter.

That acceleration is recorded in the November 2026 Statement on Monetary Policy (SMP), released the day the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85 per cent.

Reading a quarterly number

The trimmed mean is designed to look through the noisiest price movements. Each quarter, the items with the largest rises and largest falls are trimmed away, leaving a measure of the typical price change across the basket. Because of that, a shift in the trimmed mean is generally read as a shift in underlying, broad-based pressure rather than a one-off spike in a single category such as fuel.

A quarterly rise of 1.0 per cent is a different scale from the annual figures most people are used to. As a rough guide, four consecutive quarters at that pace would compound to a little over 4 per cent over a year. Four quarters at 0.8 per cent would compound to a little over 3 per cent. Neither is a forecast; the arithmetic simply shows why a move from 0.8 to 1.0 per cent in a single quarter attracts attention at a Central Bank whose target band tops out at 3 per cent.

The quarterly pick-up sits alongside the year-ended figures for the September quarter:

  • Trimmed mean (underlying): 1.0 per cent in the September quarter, 3.7 per cent over the year.
  • Headline CPI: 3.9 per cent over the year to the September quarter, unchanged from the June quarter.
  • Monthly CPI (headline): 4.3 per cent over the year to September 2026.

The distinction matters. Headline CPI includes everything, including energy prices that have been pushed up by the Middle East conflict. The trimmed mean is the RBA's guide to the underlying trend. The quarterly trimmed mean figure of 1.0 per cent should not be confused with any headline measure, and the 4.3 per cent monthly figure refers to headline CPI for the September month, not the September quarter.

Why the Board saw it as broad-based

The Monetary Policy Board's statement put the point directly: "Since the previous meeting, the data have confirmed that underlying inflation remains broadly based." It also said, "Inflation remains elevated and recent data indicate that it is broadly based."

The word "broadly" carries weight. When price rises are concentrated in a few items, a central bank can more easily treat them as temporary. When they are spread across the basket, as an accelerating trimmed mean suggests, the concern is that they reflect Demand running ahead of the economy's capacity, or that higher prices are feeding into expectations.

That second concern was central to the majority decision. According to the statement, "there is an increasing risk that higher inflation expectations will become embedded." The majority said that "a further tightening in financial conditions is warranted to support the return of inflation to target." Six members voted to raise the cash rate and three voted to keep it at 4.60 per cent; the statement does not set out reasons for the minority position.

Governor Michele Bullock gave a sense of the recent range when she told the Senate Economics Legislation Committee on 28 October: "Recently, inflation has been around 3½ to 4 per cent in year-ended terms."

Where the forecasts go from here

The RBA's November forecasts suggest the quarterly pick-up feeds into a higher underlying profile than the Bank expected three months ago. Its trimmed mean forecasts (year-ended, August forecast in brackets) are:

  • December 2026: 3.6 per cent (3.3)
  • June 2027: 3.5 per cent (3.0)
  • December 2027: 2.9 per cent (2.6)
  • June 2028: 2.5 per cent (2.4)
  • December 2028: 2.4 per cent (2.4)

The SMP says the inflation outlook has been "revised materially higher" and that both headline and underlying inflation are expected to remain above 3 per cent until the end of 2027. The Board's statement adds: "Inflation is now expected to remain above 3 per cent for the coming year."

These forecasts rest on a cash rate assumption derived from market pricing as at 28 October 2026, which implies the cash rate rises about 35 basis points by mid-2027 and then stabilises at 4.8 per cent in 2028. That path is a market-based assumption used for forecasting, not a commitment from the RBA.

Other pressures in the pipeline

Several other indicators in the SMP help explain why underlying inflation has proven persistent:

  • Wages. The Wage Price index rose 3.2 per cent over the year to the June quarter, and the RBA's WPI forecasts have been revised higher across the projection period. Liaison contacts report elevated wage expectations, pointing to little easing over the next year.
  • Labour market. Participation was 66.9 per cent in the September quarter, above RBA expectations, and the SMP notes that "employment growth held up in the September quarter as expected."
  • Credit. Business Credit grew 11.3 per cent over the year to September, according to the RBA's financial aggregates, with total credit up 8.4 per cent.

There are offsetting forces too. The SMP says GDP growth has slowed, with household consumption a key drag, and housing prices have fallen about 5 per cent from their March peak. The RBA notes that inflation could fall faster if higher rates and falling housing prices weigh on spending.

The bottom line

The trimmed mean rising 1.0 per cent in the September quarter, up from 0.8 per cent in the June quarter, is a modest number with a significant message: underlying price pressures did not ease as the RBA had hoped, and they are spread across the economy. Over the year, the trimmed mean was 3.7 per cent, while headline CPI was 3.9 per cent for the September quarter and 4.3 per cent for the month of September.

The Monetary Policy Board responded with a fifth rate rise for 2026 and said it "will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions." The next CPI release is due on 25 November 2026, ahead of the Board's 8 December decision.